Doing the Deal

0

Doing the Deal

Tony Morales

Partner

Maguire Partners

Try to integrate a social connection with the tenant to take down the natural adversarial relationship. It could be a trip, a ballgame or a lunch. This is critical because of the interpersonal connection. I’ve walked out of the room with a client and solved 10 items in 10 minutes that would’ve taken lawyers months to solve.

Timing is everything. Make the process as streamlined as possible. If you get back to a prospective tenant in weeks or months, you’ve lost the deal. That’s the most common mistake.

Honesty is key. If people understand a guy’s going to be honest at all times, it makes the process easier. They may not like what you say, but they’ll know it’s the truth.

Creativity can breed confusion. You find out what the tenant wants, be it a partnership, a part of the cash flow, and you find a way to give it to them, but the art is trying to keep it simple.

Rick Buckley

Senior Managing Director

Insignia/ESG Inc.

Don’t choose a broker who has a good relationship with the landlord but no market knowledge. Make sure the broker has a track record of making deals similar to yours.

The letter of intent should incorporate as many specifics as possible, including option language for renewals, operating expense exclusions and tenant improvement allowance conditions. If you negotiate a sloppy letter of intent, the client is going to spend more time and money in legal fees negotiating the lease, and if a problem arises, the tenant has lost valuable time and, more importantly, leverage, because the landlord already knows you’re coming to the building.

A good broker stays involved from A through Z and works directly with the attorney. If the attorney is not involved in initial negotiations, there are nuances that may not be reflected in the letter of intent.

Bill Boyd

Senior Vice President

Grubb & Ellis Co.

Account for all the economic issues that affect cost of occupancy, including not only rental rate but also future operating cost increases for the building and how they are passed through to the tenant, and the allowance for improvements and construction that is comprehensive.

Include elements beyond “hard construction,” like supervision fees, permits and documentation. A landlord may give you $25 a foot for construction, but if it’s only for hard construction, it could be a lot more expensive.

Try to take a balanced approach and educate each party the needs of the other. Some take a scorched earth approach on behalf of the tenant while the other side would be a very heavy-handed landlord posture. Act as a true fulcrum to balance the interests of both parties.

Avoid leases with increases tied to the consumer price index. They’re a convenient way for landlords to increase rent, but the CPI of gasoline, butter, housing and milk has nothing to do with commercial real estate. If the market reflects rental increases, fix those increases into the lease.

Pay attention to lease language. A tenant recently thought he had the right to renew because the broker told him he did, but when we came in to review the lease, we found that he didn’t.

Danny King

No posts to display