“You Owe Me!” said the Landlord’s Broker

Recently, in searching for a suitable property for one of our clients to lease, I spoke with a commercial real estate broker about a property he represents. I asked this landlord broker questions about the property’s size, amenities, and competitive benefits, the available space, rental pricing and offering terms, the owner, and more.  While the broker was a little less than forthcoming at the beginning of our conversation, he eventually opened up, not without some prying, and provided me with details to most of the questions I asked.

At the end of the conversation, based on the information gathered, I was able to determine whether the property would likely be of interest to my client, a company seeking to relocate its headquarters.  I thanked the landlord broker for his time and attempted to end the conversation, offering to speak with him again about my client’s needs after they’d authorized me to do so. Before I could end the call, the landlord broker shouted:

“Wait! You Owe Me!”

When I asked him what he meant, he replied by saying that because he had provided me with so much information about his landlord’s property, that in turn, I had an obligation to answer his questions about my client and its needs. Hmm!  I told him I would provide him with whatever information I could, but that I had no authority, and certainly no obligation, to do so, especially since my client instructed me to maintain strict confidentiality about them and their requirements.

The landlord broker didn’t like my response, and insisted that I was treating him unfairly.  He was serious.  This is not the first time I’ve experienced this kind of interaction.

Why do some landlord brokers think that because they provide tenant advisors with information on their properties…precisely what they were hired to do…that the tenant advisors are then obligated to disclose detailed information about their tenants’ needs?

Isn’t providing specific information the landlord broker’s job?  Isn’t that what the landlord hired him for?

What many landlord brokers fail to recognize is that tenant advisors are customers of the landlord broker.  And, like any good customer service minded professional, property brokers should treat tenant advisors with the respect that any customer deserves.

Landlord brokers are the front line salespeople for landlords. Their job is to inspire tenants and their brokers about their landlord’s property, to engage in negotiations, and to complete transactions on terms favorable to their landlords, so as to achieve their landlords’ intended ROI and other objectives.

The landlord broker’s job would certainly be easier if the tenant advisor disclosed a lot of information about its client, so the landlord broker could better determine how to satisfy the tenant’s needs. But, tenants are not always eager to disclose information for many reasons. Accordingly, they often direct their brokers not to divulge information about them.  And, that’s their right.  Despite this, some landlord brokers act as if providing property information to a tenant or its advisor is almost like doing them a favor.  I find that very odd, and a great way to turn off tenants and their advisors!

If I walked into a shoe store, asked questions about a pair of shoes, listened to the information, provided little feedback, politely said thank you, and turned to leave, would I be obligated or expected to provide a full download to the salesperson as to why I wasn’t interested?

Of course the salesperson would like to know why I chose not to make the purchase, and helping him would be the right thing to do, assuming that I was comfortable doing so. But, does that obligate me to provide such information?  Heck, no!

And, if I chose not to answer the salesperson’s questions, would it be advisable for the salesperson to demand that I answer him or berate me? Would I ever go to that store again? Would the salesperson’s boss appreciate my having been turned off to ever doing business there in the future?

From a customer service perspective, why should interactions over commercial real estate be any different?  Because greater dollar amounts are at stake? Wouldn’t that suggest a greater emphasis on customer service and relationship building with both tenant and broker, as a means of generating a basis for future opportunities?

Most landlord brokers are very professional.  Some still don’t get it.  Those that embrace a customer-service approach to promoting their landlords’ properties continually achieve the lease more space than their competitors, and highest levels of success, both for themselves and their landlords.

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:

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Copyright Real Estate Strategies Corporation 2011.  All Rights Reserved.

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Why Should I Negotiate Against Myself?

You’re going to love this one!  This landlord deserves the Self-Centered Stupidity Award!

In a recent transaction, our firm represented a well-known global company seeking to relocate its U.S. headquarters into an amount of office space that got the attention of a lot of commercial landlords.

After reviewing the local market, our tenant selected a short-list of three properties.  After receiving proposals from all three properties, our tenant decided that one landlord offered terms that not only were not competitive, but which were truly out in left field.  We agreed. This, despite our having provided all three landlords with the same request-for-proposal containing identical information, and after we provided each of them with the same guidance.

So, our tenant eliminated the non-competitive property from future consideration, and proceeded to negotiate with landlords of the other two.  After a while, the landlord of the eliminated property contacted us, expressing his extreme disappointment in his property having been removed from our tenant’s consideration. The landlord insisted that our tenant was in error, and that our tenant should have submitted a counter-proposal.  He then worked very hard to convince us that he and his property could be competitive and satisfy our tenant’s needs, if given another chance. He asked, no…practically begged, for an opportunity to get back into the competition.

After some discussion, our tenant agreed to consider a new proposal from the landlord.  When told the good news, the landlord was furious that he would not receive a proposal from our tenant. He complained, saying “Why Should I Negotiate Against Myself?”  What a jerk!

Our tenant moved on and made a deal elsewhere.

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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The Dangers of Hand-Shake Brokerage

There was a time when a person’s word and his / her hand shake meant a lot.  They were both binding and had real meaning.  Today, with vast global cultural differences, various interpretations of words, lengthy and extremely detailed contracts, a highly litigious society, and some plain-old dishonest people, conducting business on a hand-shake is not only inappropriate, it’s downright dangerous!

Remember that two honest people, with the absolute best of intentions, can easily misunderstand each other and disagree.  If this is true, then why do some commercial real estate brokers still conduct business on a hand-shake?  Why do they work on behalf of companies to negotiate transactions without so much as a simple document describing the roles of client and service provider?  Are they overly trusting? Are they lazy? Is there an advantage to working in this manner?

In many states, a real estate broker working without a document indicating which party he / she represents may be in violation of license law.  Such action could subject the licensee to fines, temporary or permanent license suspension, or worse.  In other states, the role of a real estate broker, and therefore his ability to serve his customer as intended, may be predetermined by law, irrespective of documentation.

So, at a time in history when creating written records and documents is easier and quicker than ever before, why do some commercial real estate brokers still work on hand shakes?  Is this simple laziness?  I’ve heard some brokers say that instead of spending time on documenting their client relationships, they move directly into the deal. They say that paperwork doesn’t make them money, but closing deals quickly does.  Some positively characterize this approach as being focused on the client’s needs, not their own. Is that really true?  Since the best written agreements, in these instances, describe the roles, rights, and responsibilities of both real estate brokers and their clients, I don’t see how working without such a document could possibly be in the clients’ best interests. I don’t even believe it is the best approach for service providers, either!

Some brokers have told me that they work on a hand shake, because their clients prefer not to sign agreements.  I find this to be a weak argument.  Don’t companies sign other agreements, like leases, employment agreements, purchase and service contracts?  Most companies will gladly sign a representation agreement when the reasons and benefits of doing so, as well as, the risks of working on a hand shake, are properly presented to them.  In fact, most companies will shy away from executing an agreement when they’re uncertain of the ability of the service provider to perform, when they lack confidence in the service provider’s experience or expertise, or when they are not yet committed to a project.

Are real estate brokers aware of the true implications of not documenting their client relationships?  Do they know that when working on a hand shake, their relationships, and their corresponding obligations, may not be clear?  Do they disclose to their clients that without proper documentation, their relationships may be different than intended?  Do they explain the increased potential for conflict-of-interest? Do they communicate that, absent a written representation agreement, a real estate broker presenting buildings to a prospective tenant or buyer may have a binding legal fiduciary obligation to represent the property owners?  By not informing their clients of these facts, brokers can land themselves in trouble.

Given the apparent dangers, why would any commercial real estate broker or his client, work on a hand shake?  What are 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 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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Do Your Clients Really Need to See EVERY Available Property?

It is amazing that today, some commercial real estate brokers still believe that they and their clients must physically visit every building that might possibly support their clients’ needs. This remains the case in many geographic markets that are over-supplied with millions of square feet of available properties. My gosh!  Brokers forcing their tenant clients in and out of 10, 15, 20, or more buildings over an entire day or two, just seems so counter-productive!  In fact, it is!  Your clients’ time is much too valuable to waste it trudging in and out of building after building.  And, frankly, your time is equally valuable. So, why waste so much time?

By showing your clients every available property, are you really providing them great service or are you simply protecting yourself?

With the availability of technology and information at your fingertips, there exists no need to show your clients every property.

For those brokers who have not been appointed the authorized or exclusive representative of the tenant seeking to acquire a building, well, yeah, you do have to visit every property.  Because in that capacity, you don’t represent the tenant and you’re not really providing them much service.  In most states, your binding fiduciary obligations would be to yourself and/or to the property owners whose buildings you present. So, you have to show every building in order to protect your own interests.

The optimal approach to delivering service to your clients is to be formally engaged, by written agreement, and authorized to represent their real estate interests.  As your clients’ authorized representative, you should have a process that permits you to gather information about them and their business needs, so you can gain an understanding of how they wish to acquire and use real estate.  Coupled with your knowledge of your local market, you should be able to marry your clients’ needs with those properties that can best accommodate them, and eliminate those properties that don’t apply.  If you’re uncertain about whether particular properties would work, you can always provide your clients with a written or electronic report, conduct a desktop review, and together with your client select those that are best suited.

If you’re concerned about covering your tail or losing a commission, for fear that some outside broker may bring an eliminated property to your clients’ attention and that your client may forget that you’ve already presented it, or because you’re concerned that some landlord may attempt to circumvent you, there is an easy solution. Simply provide your client with a list of those properties that you eliminated along with your reasons, and offer to inspect those properties with your client at a later date, if the client wishes to see them.

In this manner, your client’s time and resources will be respected and maximized, your tail will be well covered if you feel it must be, you will provide a better service to your clients, and will drive to conclude their transactions quicker, more effectively, and more profitably for everyone.

So, NO, your clients don’t really need to see every available property!

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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Mr. Landlord: When You Convince All of Your Other Service Providers to Reimburse You…Call Me!

If you’ve read any of my writings over the last few years, my positions are clear about the silliness that some die-hard commercial landlords still play when it comes to paying commissions that are due real estate brokers. Most landlords are very professional, appreciate the efforts put forth by commercial real estate brokers, and gratefully pay their compensation in-full and on time.  But, there still exists this small, decreasing group of curmudgeon-like landlords, who think it is their right to treat brokers unreasonably and unfairly. Their days, like their ability to realize great success, are numbered.

One of my all-time favorites is how many in this dying little group of commercial landlords think that real estate brokers are the guarantors of tenant creditworthiness, and that commissions paid to brokers should be conditioned and contingent on tenants performing their lease obligations. Some of these knuckleheads even think brokers should reimburse landlords when tenants default. The answer to this is really simple.  Commercial brokers:

* Are not credit analysts, and cannot provide you with any more details than you can obtain on your own

* Cannot guarantee tenant performance any more than they can guarantee landlord performance

* Deliver tenants to landlords, landlords to tenants, and negotiate transactions

* Have completed their job when the lease is executed

* Are protected by the laws of most states, which say that commissions on lease transactions are earned when the documents are executed, not over time or based on anyone’s performance

Despite the above facts, some landlords unfairly seek to shift their business risk to commercial real estate brokers, by claiming that the commissions due those brokers should either not be paid or reimbursed to the landlord, if a tenant defaults in the performance of its lease obligations.

To those landlords, I offer a simple response:

When you stop payments to, and / or receive reimbursements from ALL of your accountants, advisors, architects, attorneys, builders, cleaning companies, consultants, contractors, cost estimators, expeditors, delivery companies, drywall installers, electricians, elevator companies, engineers, environmental service providers, financial advisors, fire safety technicians, HVAC installers, insurance brokers, landscapers, lenders, masonry contractors, maintenance companies, management company, mortgage brokers, paving contractors, plumbers, roofers, security contractors, steel erectors, subcontractors, suppliers, tax advisors, trash haulers, truck drivers, utility companies, vendors, window suppliers, YOURSELF, and everyone else involved in your transactions in any way…AND, you advise me BEFORE we engage in any discussions that you will unfairly attempt to shift your business risk to me and to everyone else…only then, would I possibly consider doing business with you!

And, after you inform all of the above about your new payment policies, let me know how much longer you actually expect to be in business.  Frankly, when I explain your approach to my client…the tenant…there’s a very good chance they won’t want to do business with you, either!

So, let’s avoid this ridiculous conversation.  You bear what is rightfully your risk, the tenant will bear its risk, and we’ll bear ours, so we can all focus our energies on the real reason we’re engaged in a dialogue…creating a transaction between you and our tenant!

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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