Archive for the 'Real Estate Developer' Category

Commercial Real Estate Brokers: Shhh! Don’t Tell Your Tenants How Much Commission You’ll Make!

An Open Letter to Commercial Real Estate Brokers

Hey, commercial real estate brokers?  Keep your compensation a secret, even from your own clients. They don’t know how much you make, they’re too dumb to figure it out, and if you don’t bring it up they won’t think about it.  NOW, REALLY!

In most commercial real estate leasing transactions, commercial brokers representing tenants receive their compensation in the form of commissions paid by landlords.  Yep, that sure sounds like a conflict-of-interest to me!  But, unfortunately, that’s the way the industry works.

Guess what?

  • Your clients can figure out your compensation…and, they will!
  • Why withhold information from you own client?
  • When your role is to protect your client’s interests, withholding information that they can easily figure out on their own makes you look stupid and dishonest
  • Are you obligated to disclose your compensation to your clients? While you may not have any legal obligation to do so, from a moral and ethical perspective, I’m pretty sure the answer is “Yes!”

Whether or not you should disclose your compensation to your clients also begs other questions:

  • Why would you want to be transparent?
  • Are you concerned that someone might view your situation as your being over compensated somehow?
  • Did compensation discussions take place that may have negatively affected your client?
  • Is something negative going on?
  • Did you have to do any favors or compromise your position (or that of your client) to secure your compensation?
  • Were those favors at the expense of your client?  Did you disclose them to your client?
  • What might your client have lost in exchange for the compensation you secured?
  • Have you compromised your client in any way?
  • Do any conflicts-of-interest now exist or did they previously exist?

If all you’re doing is getting paid, fairly and adequately, why wouldn’t you disclose your compensation to your client…the one who is the very reason for which you’re able to generate compensation?

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 finance 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 Zezas, RealStrat’s clients engage the firm when acquiring, disposing of, 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

Copyright Real Estate Strategies Corporation 2011.  All Rights Reserved.

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Always Cut Your Commission!

Yeah, that’s right!   “Always Cut Your Commission!”  And, why not?  If the only value you can offer your clients is your price, then you probably will have to cut your commissions to stay in business!

Actually, let’s clarify what is often referred to as “Commission Cutting.”  It simply means that one broker is willing to sell his or her services at a lower rate than he or she would for other projects, or perhaps in comparison to his or her competitors.  So what?  Does that mean every one in the local market must sell their services at the same price?  If you buy shoes from one store at a low price, does that mean that all of the other shoe stores will lose all of their customers and go out of business, just because you got a good deal?

Just like in other industries, there exist many common practices in commercial real estate, including those surrounding broker compensation.  But, no “standard” compensation or commission structure exists.  In fact, in most states, setting commission standards is considered price-fixing, and is illegal!

So, what’s all this noise about brokers who cut their commissions and how that supposedly affects the compensation of other brokers?  The response I often hear is that if one broker offers low-priced services then every landlord, tenant, buyer, and seller in that market will make the same demands.  Really?  Well, guess what?  They already want your services at the lowest possible price.  Shouldn’t they?  Don’t you want to buy those shoes as inexpensively as possible?  Don’t you negotiate for a lower price when you buy or lease a car?  Didn’t you negotiate when you bought your home?  Did everyone else get their home for the same price you did?  Of course not!  Seeking a lower price is the American way, and there isn’t a darned thing wrong with it.

Ask yourself these questions:

  • Are you a low-cost service provider?
  • Is low-cost always the winner?

NO!  If that were true, there would not exist high-priced hotels, restaurants, resorts, clothes, homes, cars, etc., etc., etc., or anything of better quality.  If low price always won, consumers and businesses would never buy the best quality or engage the best of any service provider.  Instead, they would only hire the cheapest.  And, in those instances, they’d get what they paid for.

Forget what other brokers do.  There is plenty of room in every industry for low-cost service providers, because some clients do make purchasing and hiring decisions purely on cost.  Low cost, almost always means low quality, and those who hire only on a low-cost basis typically receive services commensurate with what they pay.  And, if that’s their preference, so be it!

The answer here is very simple:  If you are a low-cost service provider, be the best one in your market.  If, on the other hand, you wish to be something other than low-cost, make sure that like Mercedes, BMW, Nobu, Gucci, and other fine products and service providers, you provide your clients with such incredibly valuable services, experiences, and outcomes, that your other-than-low-price will be warranted and you will be in demand!

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

For additional profiles, pictures, and more click here or go to http://realstratnews.wordpress.com/media-information/.

Copyright Real Estate Strategies Corporation 2011. All Rights Reserved.

###

Has Your Wife Inspected the Building Yet?

In a recent industrial lease transaction, how the deal came to a close was not only unusual, but very telling about the direction of the current economy.  A privately held company negotiated with a commercial landlord to occupy a full building in a prominent and well-located industrial park in central New Jersey.   The landlord had an excellent reputation for quality designed and solidly constructed buildings, for maintaining high service levels, and for sticking to his word.  However, the landlord’s buildings were also known to be priced higher than his competition.

The landlord, a very astute and respected business man, had recently gotten very aggressive in lowering rents in an effort to attract more tenants and fill his buildings’ vacancies.  Nonetheless, his rents were still higher than many of his competitors.

In this particular negotiation, the landlord offered extremely flexible terms and an annual rental rate that was one of the lowest he had offered in the last eight years.  After weeks of back and forth, the tenant’s CEO informed the landlord that the company would not accept his terms, and that the company decided to lease a building of similar quality located twenty minutes further south.  The CEO said that the building they had chosen was less expensive, and that given current economic challenges, the spread between rents for the two buildings was significant enough that he could not pass up the additional savings.  He told the landlord that his company made its decision a week earlier and that its lawyers were already deep into lease document negotiations.  The CEO was a candid guy, so the landlord took him at face value and correctly assumed this was not a negotiating ploy.

Disappointed for having worked so hard to land the tenant, the landlord knew he couldn’t win them all.  The landlord confirmed for the CEO that he had truly offered all he could, and wished the tenant well.  The CEO stated that even if the landlord had offered more, he did not expect the central New Jersey building to be able to match the lower rents at the selected building.  So, they parted, saying they each hoped to do business together again some.

That weekend, the CEO was driving through central New Jersey with his wife on his way to a social function.  Since his wife had heard so much from him about the intense building negotiations, the CEO decided to drive her past the two buildings, both the one to which the company planned to relocate and the central New Jersey building he’d decided not to lease.

After driving around the central New Jersey building and sitting in front for a few moments, the wife, who rarely involved herself in her husband’s business affairs, told her CEO husband that he was nuts for passing-up the central New Jersey building.  She told him that she thought he’d made a mistake, and that the building offered an image that was far more impressive than anything else she’d seen.  From what the CEO told her, the central New Jersey building offered a giant leap in functional design, in comparison to the company’s current facility and the one the CEO selected.  She said that the building he had chosen could not compare, that his company would have benefited considerably more by moving its employees and operations to the central New Jersey building, and that the company would likely have become more profitable and able to significantly elevate its own image had it chosen the central New Jersey building.  Wow!

The CEO’s wife was right, and he was convinced!  First thing Monday morning, the CEO called the central New Jersey landlord and agreed to close the deal, despite the additional rental cost for the central New Jersey building.  The CEO realized that given the terms offered by the landlord, he would basically get a BMW quality building for the price of a Chevy.  He knew that, despite the continued economic doom and gloom heralded by the media, a good deal would still be a good deal.  Moreover, the CEO, obviously an intelligent business man, recognized that the lowest cost deal, even if it is less than the cost of a Chevy, while often attractive, is not always the best deal.  He understood that value could be derived, and success could be achieved, in multiple ways, other than through mere cost reduction.

When companies begin to return to rational thought, as in the case above, a circumstance that has lately been repeated again and again, you can be assured that such activities are the true signs that the recovery is gaining traction.  And, when your wife tells you that your company would be better off by taking a particular action, you may want to listen closely.

What unusual circumstances have surrounded your projects?

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

For additional profiles, pictures, and more click here or go to http://realstratnews.wordpress.com/media-information/.

Copyright Real Estate Strategies Corporation 2011. All Rights Reserved.

###

Want to Know More About Customer Service? Rent a Car!

How many commercial landlords incorrectly consider themselves to be in the real estate business?  How many real estate brokers assume they’re in the business of leasing or selling properties?  They’re all wrong!  From a customer service perspective, both parts of the commercial real estate industry could take direction from the car rental business!

Recently, I flew to Oklahoma on business.  Prior to my flight, I arranged for a rental car to be available.  Since I had combined two business trips into one, I flew in from another city that required indirect flights.  So, after traveling all day long, when I finally landed late that night, the last thing I wanted was anything more that would keep me from getting some sleep.

As I got off the place, I walked through the terminal and arrived at the car rental area.  When I approached the car rental counter, I found a young man sitting behind the desk quietly with a smile on his face.  It was almost midnight, so the car rental area, and the airport itself, were both pretty quiet.  I dropped my bags and said: “I’m Andrew Zezas…I believe you have a car waiting for me?”  The smiley service representative stood up, said: “Good evening, Mr. Zezas. Your car is ready!”  He proceeded to give me very precise directions to the elevator that would take me to my car.  I picked up my bags, followed his directions, and when the elevators opened, I stepped off and saw the their booth just a few step in front of me.  I walked up to the booth and opened my mouth to speak, when the attendant said: “You must be Mr. Zezas!  Your car is right here.”  13 feet away from where I was standing was a just cleaned sparkling sedan with the engine idling, ready to take me to my hotel.  The attendant handed me my paperwork, and in what seemed like little more than 30 second, my bags were in the trunk, I met up with my colleague, and we were driving out of the airport.  How cool was that?  Sleep was only a short drive away!

Before I pulled off the airport property, a sensor on the dashboard told me that pressure in one of the tires was very low.  So, my colleague and I immediately returned to the rental booth.  I figured, sleep might have to wait a while.  The attendant saw us pull in and, before he even knew what the problem was, he couldn’t apologize enough.  He asked me how he could make up to us the terrible inconvenience his company had caused us.  Was he kidding?  Terrible inconvenience?  We drove for all of 87 seconds!  What terrible inconvenience?  This guy really meant it!  He couldn’t stop apologizing.

The attendant walked into his booth, and in under 3 minutes came out with keys to a brand spankin’ new SUV.  He said: “We’ve upgraded you two levels, as our way of apologizing.  Your car is right over there”.   Wow!  I walked over to the SUV, threw my bags in the back, and was overwhelmed with that new car smell that I can never get enough of.  When my colleague and I looked down at the dash, we both saw something neither of us had ever seen before.  Now, mind you, we each have been driving for more than 30 years.  What we saw amazed us.  The odometer read….3!  Not 300, not 3,000….just 3, little old miles.  This shiny, wonderful smelling, free upgraded SUV, had only been driven out of the factory, onto the trailer, and into the rental parking lot.  It had basically never been driven by anyone else other than the guys who built it and delivered it.  And, I would be the first!  Now, that was cool!

So, let’s count the surprises:

1. Smiley greeting at the counter

2. Greeting at the booth, which ws easy to find and close by

3. Car waiting next to the booth

4. 10 or 20 apologies

5. Under 3 minute car replacement

6. Free upgrade to a much larger and more comfortable vehicle

7. And, a vehicle that, if it was any newer, it would still be still steel ingots and petroleum!

Now, that’s what I call customer service!  You think I’ll rent from that company again?  You think I’ve told this story a bunch of times, and have encouraged my colleagues, clients, family, and friends to rent from them?  You think word of mouth travels fast?  You bet!

Landlords and brokers, errors happen in transactions and when providing service all the time.  Some are simple, honest mistakes, and others are major screw-ups, or worse.  When was the last time you provided seven surprises as a way of making your tenants and clients feel like they wouldn’t want to do business with anyone else ever again?

Send me your thoughts.

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

For additional profiles, pictures, and more click here or go to http://realstratnews.wordpress.com/media-information/.

Copyright Real Estate Strategies Corporation 2011. All Rights Reserved.

###


9 Defensive Strategies When Your Building is in Serious Financial Trouble

So, what happens if you uncover bad news and find out that your company’s landlord isn’t just managing cash flow but, may truly be in danger of losing its building…..the building YOUR COMPANY OCCUPIES?!

Here are 9 Defensive Strategies When Your Landlord May Lose The Building Your Company Leases, that might stave off catastrophe:

1. Buy the building from the landlord (This one may be challenging if your company is a small tenant in a large building)

2. Buy the building’s mortgage from the lender

3. Sublease your space (This strategy may be least effective if the building is experiencing financial hardship, especially in markets with little demand for space)

4. Restructure your lease (Can your company create enough of a financial benefit for itself and its landlord to save the building? What would be the quid pro quo?)

5. Seek self-help (Which services, on which the landlord may default, can your company perform or have performed by other service providers, without placing itself into default of its lease?)

6. Check with your real estate professional (What’s the word on the street?)

7. Check with your attorney (What legal remedies might be available to your company?)

8. If your lease is scheduled to expire, move now….move early (The double rent that your company might pay for a short time period, if it moves to other quarters before its lease expires, may be cheap in comparison to the expenses, lost productivity, and other challenges it might experience if the landlord loses its building)

9. Have a conversation with your landlord to determine what you might work out together
In tumultuous economic times such as these, prudence demands that executives be proactive in understanding the stability and risk associated with the real estate their companies occupy.  Advanced planning and a little investigative work, coupled with creative solutions can go a long way to protecting your company’s flank.

 

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 finance 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 Zezas, RealStrat’s clients engage the firm when acquiring, disposing of, 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

Copyright Real Estate Strategies Corporation 2011.  All Rights Reserved.

###

33 Signs That the Building Your Company Leases May Be In Serious Financial Trouble

As your company seeks to reduce costs and preserve its cash, it is important to keep a careful eye on those other companies that provide services to you that can have a material affect on your ability to conduct business productively, safely, and profitably. Specifically, your company’s landlord could be experiencing financial or other challenges that, if unresolved appropriately, could hinder your company’s ability to enjoy a productive business environment, irrespective of your continued rental payments.

Watch for a number of issues that could signal your landlord is having difficulties, or may be headed for them. They could be signs that your landlord may be in danger of losing its building. While this list is not intended to be complete, some indicators may include:

1. Significant increases in vacancy in your building

2. Increases in vacancy in other buildings where your landlord has an ownership interest

3. Increases in vacancy in neighboring competitive buildings

4. Construction projects that start at your building but, languish unfinished for extended time periods (typically a sign that contractors are not being paid on time or at all)

5. Decline in response time and / or communications for service, maintenance, or repairs (a sign that staff has been cut or is stretched too thin)

6. Increase in equipment and system breakdowns, such as elevators, HVAC systems, etc. (indicates a decline in preventative maintenance, staff cuts, or more)

7. Fewer landlord or management company employees visible on site

8. Decline in security, life and property safety services

9. Consistent lack of consumable items in restrooms and other areas

10. Interior office, common area, or window cleaning occurs less often

11. Trash not disposed of in a timely manner or is stored in basements and other areas

12. Snow not removed from parking lots in a timely manner

13. Landscaping not updated or maintained and / or grass is cut less often

14. General deterioration of the appearance of the building, parking lots, and grounds

15. Reduction of tenant events

16. Deferred capital improvements

17. Preventative maintenance announced or planned but, not implemented

18. Floors, glass, and metal and other interior components not polished or maintained

19. Band-aid repairs being made in place of needed capital replacements

20. Unresolved mechanics liens from contractors and other service providers

21. Real estate taxes delayed or not paid

22. Mortgage payments delayed or not paid

23. Water, utility, or other payments delayed or not paid

24. Increase in unresolved or unpaid fines from the municipality and / or other governmental authorities

25. Substantial and / or unexplained increases in operating expenses and costs of landlord or management company provided services passed on to tenants

26. Landlord making multiple requests for you to sign estoppel certificates or lease summaries (suggests that the landlord may be scrambling for financing or attempting to sell the building)

27. Real estate brokers unwilling to show your building to prospective tenants (suggests that landlord is unable or unwilling to pay commissions – typically a sign of a cash crunch)

28. Contractors seeking payment from you instead of landlord (indicates a lack of confidence on the part of contractors in their ability to be paid on time, in full, or at all)

29. Contractors unwilling to work in your building (see above)

30. Multiple switching of leasing and / or managing agents, building managers, cleaning companies, security services, vendors, service providers

31. Landlord selling other assets

32. Landlord’s inability to sell or refinance your building

33. Change in landlord’s leasing program – agreeing to many short term leases to small, transient, and / or undesirable companies

What can you do to protect your company and assure that your environment remains productive, safe, and profitable, and that your company receives the services to which it is entitled?

Imagine planning and executing a well designed defensive operational and financial strategy, only to find out that the real estate your company leases may not be under your control and that the space may be pulled out from under you!  That’s right!  Your landlord may not be as good at pruning expenses and could lose your building, throwing into question your company’s rights to remain in its space.

“But, we have a lease with many years remaining;  We pay rent and have never been late!  They can’t take our space away from us….can they?”

The answer to that question is a resounding…..”That depends!”  It depends on a number of factors, from whether or not your landlord will really lose its building, to who will end up with it, to what the process will be if the landlord does lose the building, to how thorough your company’s lease was negotiated in the first place and what protections that document affords you.

The first step is to read your company’s lease. Check all of the clauses that might impact your occupancy, including those pertaining to non-disturbance, landlord default, self-help, sublease, early termination, and others. Since your lease constitutes the rules of engagement, be certain to understand your company’s rights, privileges, and obligations, in the event of a serious landlord problem.

Make it your business to understand all lease components that could affect your company’s ability to remain in the building if the landlord were unable to support it financially. Specifically, does your lease provide for self-help (the ability to secure services that the landlord fails to provide) in the event that the landlord defaults in providing services to you? Can you contract for temporary cleaning and other services? Can you secure utilities directly from the utility provider? Can you do the above without putting your company into default of its lease?

What if the landlord actually goes bankrupt and ownership of the building reverts to the lender? Can the lender terminate your lease? Maybe! Does your lease require the landlord to secure a non-disturbance agreement for you from the lender? Has the landlord provided you with that document? A non-disturbance agreement, if written properly, will most often prevent a successor, like a lender, from terminating your lease.

By now, you’re likely asking: “Why would a lender terminate our lease? Wouldn’t they prefer to retain rent paying tenants?”

That, too, depends! It is possible that your building could have a greater value or a greater likelihood of being sold if it were vacant. Perhaps a larger tenant, or one that for some reason is more desirable, may want your space. Or, maybe your company’s use of its space is not conducive to the lender’s future plans for the building. Without a non-disturbance agreement, your company could receive notice to vacate and have little choice.

When commercial landlords experience financial difficulties, the tell tale signs may be easy to spot. In many cases, payments to vendors, service providers, taxing authorities, and others become delayed or are sometimes not paid at all. In others, the building shows signs of neglect.

If you believe you have reason to be concerned, do a little detective work. Check with the local property tax dept, utility companies, and other building services providers to confirm that bills are being paid in-full and on-time. Ask around, too. Are vendors, commercial real estate brokers, contractors, and others being paid in-full and on-time? But, be careful here. You wouldn’t want to spook anyone and create concern about your landlord if problems don’t exist.

Above, we discussed 33 Signs That the Building Your Company Leases May Be In Serious Financial Trouble.  Guess what?  There are more than 33 signs!  Take a look around your building and ask yourself some of these questions:

34. Has building management or maintenance staff been cut?

35. Is the landlord any less responsive?

36. Are capital projects being delayed?

37. Is construction languishing in an incomplete state for extended periods?

38. Are repairs taking too long to complete?

39. Does the building look as good as it did?

40. Are the interior and exterior common areas being well maintained?

41. Is the landscaping being properly maintained, trash being removed and parking areas being plowed of snow promptly?

42. Are vacancies growing?

43. Are smaller, less desirable, and / or transient tenants taking space?

44. Has the landlord tried unsuccessfully to sell or refinance the building?

These are common indicators that a building and / or its landlord may be in serious financial trouble.  So, how bad could it get? What could happen if your landlord DOES lose your building to its lender…..or, to the sheriff for non-payment of property taxes?  It could get ugly…very ugly, with your company’s productive becoming the victim.

Do your homework…early and thoroughly!

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 finance 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 Zezas, RealStrat’s clients engage the firm when acquiring, disposing of, 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

Copyright Real Estate Strategies Corporation 2011.  All Rights Reserved.

###

Brokers Compensation is Performance Based…But, Who Must Perform?

I love it when some commercial landlords claim that the commissions they pay to commercial real estate brokers should be conditioned on whether a tenant performs or defaults under a lease.  Some landlords insist that they should not be required to make future commission payments if tenants default.  Some go so far as to demand reimbursement of commissions by real estate brokers when tenants default.

Many commercial landlords argue that commissions should be paid based on the value landlords derive when tenants pay rent.  Those landlords claim that if a tenant defaults in paying rent, then the landlord’s value is diminished, and the commercial real estate broker should somehow be responsible for that default and should not be entitled to its full compensation.

This is simply an issue where commercial landlords attempt to pass on their risk to real estate brokers, as a result of landlords not performing the due diligence necessary to protect their own interests.  Do landlords really believe that real estate brokers are capable of analyzing the financial abilities of commercial tenants?  Do landlords really expect brokers to act as credit analysts and insurers of tenant creditworthiness?

Sure, the compensation of commercial real estate brokers is performance based.  But, to who’s performance does that relate?  Not the tenant’s performance!  Real estate brokers are not compensated based on the performance of their tenants. That’s why most courts of law have found that a real estate broker’s commission is due when the lease is executed by landlord and tenant, not at the end of the lease after the tenant has performed its obligations. So, from a landlord’s perspective, a commercial real estate broker should be paid for its own performance, for “delivering” a tenant, not for what that tenant does or doesn’t do after the landlord has accepted the tenant and after the landlord has freely elected to enter into a transaction with that tenant.

In fact, a commercial real estate broker working on behalf of a tenant may receive payment from the landlord, who is, in turn reimbursed by the tenant for the cost of the broker’s compensation along with other costs through payment of rent.  So, because tenants reimburse landlords for real estate broker compensation, some courts of law have held that, in fact, it is the tenant that actually pays the broker’s commission.

The world has changed and business, especially commercial real estate, has become a riskier industry.  Companies that appear to be healthy may not be, or may become unhealthy and default on their obligations at a later date.  This puts more burden on commercial landlords, and the necessity for them to take greater steps to protect their interests has become even more important.  For the record, it is not only tenants that can become unhealthy….

The issue of whether landlords should place the burden of tenant default on the backs of commercial real estate brokers has been an on-going source of debate, both in this blog, in LinkedIn, and in the commercial real estate industry.  And, so long as some commercial landlords, not the best or strongest landlords, mind you, unfairly attempt to shift their obligations and risks onto commercial real estate brokers, unfortunately this discussion will continue.

However, as the commercial landlord industry consolidates and becomes more sophisticated, that out-dated mentality of “stick-it-to the-real-estate-brokers” appears to be fading away, as greater numbers of commercial landlords recognize the benefits they derive from commercial real estate brokers representing tenants and the commissions to which those brokers are rightfully entitled.

 

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 finance 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 Zezas, RealStrat’s clients engage the firm when acquiring, disposing of, 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.

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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.