Growing Firm, Exploding Offer, a New Home

A Company Makes Its Move

By LAURENCE DARMIENTO and DANNY KING, Staff Reporters

Adam Miller had a glazed look on his face, the kind of look that comes after hours of hard labor and very little sleep.

Miller, his partner Perry Wallack and other employees of CyberU, an online educational training business had just moved from one suite at a Santa Monica office park to another.

No big deal? Easy for us to say.

“By about 10 p.m. there were five us here and the movers. And at 12:30 a.m., it was me and Perry and the movers,” recounts a weary Miller. “I unpacked about 1 a.m. while the guys were moving stuff. And at 1:30, Perry and I left.”

The actual move followed a search for space that lasted well over a year, took detours and tested the patience of young entrepreneurs trying to grow a young company. And just when the 33-year-old Miller couldn’t bear another dead end, the company got a better deal than he imagined just a stone’s throw from where they were.

L.A. real estate deals typically make news when the numbers are big. A skyscraper gets bought, an industrial park gets sold tens or even hundreds of millions of dollars change hands. But L.A. County is home to 220,000 businesses with fewer than 100 employees, and deals like CyberU’s get done every day of the week, every week of the year.

These are not big deals. CyberU’s rental consideration was just under $1 million over three years for 11,500 square feet of space. But to those involved from the tenants to the landlords and even to the moving company they make an imprint. And collectively, they help determine the pace of the local economy.

To get an idea of the complexities involved in even a small deal, the Business Journal sat down with the principals at CyberU, along with several others involved in the move, to discuss the search, the deal and the relocation.

But first, some background.

From the start, Miller was on an education track studying at the University of Pennsylvania, where he got dual degrees: a B.A. in European History and a B.S. in Systems Analysis at Wharton. Then, to UCLA, where he completed a combined law/MBA program in 1994. “I kept pursuing my training to run a company,” he says.

CyberU took shape in Miller’s New York apartment three years ago. The idea was to provide on-line education to adults everything from American history to botany.

“Ultimately our objective is to improve access to education on a global basis,” he says matter of factly a goal that would seem na & #271;ve, except that the company was hatched at a time in the dot-com boom when all things seemed possible.

The business started small, funded initially by angel investors and operating for six months in Miller’s New York apartment before the founding management team decided to move to Los Angeles to set up a real office and take advantage of cheaper land and labor costs.

Over time, the big growth came in offering on-line training for corporate clients, such as certification in programming languages or whatever a company might need to disseminate information to its employees.

The creative technical employees are Web developers, or software engineers. They program the actual code for the proprietary “corporate education system” software. That software allows companies to track and manage employee training. A common example of that training would be teaching employees Microsoft Office applications, such as Word or Excel.

The first office was just a 1,000-square-foot suite in the Santa Monica Business Park, an Equity Office property and at the time home to several e-business stalwarts, including Stamps.com. Within three months the company had moved to a suite three times the size. And by late 2000 CyberU was already feeling a space pinch and on the lookout for new offices as it started to win contracts from bigger and bigger corporate clients. Here is the story of that real estate search.

Adam Miller

Chief Executive

CyberU

About 2 & #733; years ago, in November 1999, we had eight people in a very small office, about 1,000 square feet at 2950 Ocean Park Blvd. We were there three months and then moved to 3250 Ocean Park, which is 3,250 square feet, coincidentally.

At that point that office seemed enormous because we still only had about 15 people. We wanted the open plan because we were an early-stage company and it was best to keep the communication open with one big room. But the company kept growing, because we started to get very successful with what we were doing on the corporate side. And as we started to win Fortune 500 accounts we started to have the need to have professional service people handle those accounts. So we had this need for a whole new group of people we hadn’t had before.

All of a sudden 3250 started getting crowded. We realized that in order to accommodate the growth, we needed to do something and the real estate market although the stock market was collapsing was still holding pretty strong.

The search begins

We started to get some calls from brokers. I spoke to Matthew (Miller) and he seemed to be intelligent and understood the market. I agreed to meet him for a quick meeting to go over what space he had available. He came by the office and we got along very well.

That is around the time the real estate market started to decline. Companies weren’t just doing poorly; they were shutting down. All of a sudden the sublet market was taking off. One week Matthew took us to see Cooking.com and we were going to move into that space, because they were going to move. We had the deal. It was about a year ago. But the day we were supposed to sign there was an announcement they had laid off a bunch of people and had canceled their move and were staying in their suite.

We continued to hire more sales people, but there was nowhere for them to sit because it was so loud in the room, just one big room. So we ended taking a suite upstairs (in July 2001). It was about 1,100 square feet. Again it seemed like we had some room. All the sales people were in a different place. Downstairs it was just professional services and technology. But again, we were successful even in the down market and we kept winning client accounts. All of a sudden those offices started getting crowded.

Then Sept. 11 hit, and we said, “OK, Maybe we shouldn’t be growing so fast, because of what is going on in the economy.” The markets had collapsed. We were very strong in the financial services sector. It was a very difficult time. But our business kept growing even while all around us businesses were shutting down. And so we said, “OK, we are going to have to move.” We can’t hire anybody else because there is nowhere to put them. We probably had 30 people when we went to the second suite, and we kept growing. Then we had 45. When I say there was nowhere to put someone, I mean there was nowhere to put someone. People were sitting at bridge tables, four in a row, all smushed together. This was right at the beginning of the year.

Triumph and disappointment

Now we recognize we had to move. And because of what was going on in the economy, there were sublet opportunities everywhere. Once word got out we were going to move, we got barraged with brokers. They all have the exact same listings, so they all call you about the exact same space. We got along very well with the people at Equity Office. They didn’t want us to leave the park.

But we didn’t like the space for two reasons. At first we had wanted an open plan space, but because the company was maturing our requirements became different. We recognized that the sales people and the professional services people needed offices but we wanted the technology people to have an open plan.

So we almost wanted two different offices at once, so we were fairly difficult from that perspective. We also saw there was so much space in the market we could be picky. Equity hadn’t dropped their prices yet, and the differences between doing a sublet deal and a direct deal were obscene. At that point it was $2 a square foot difference. Equity (wanted) $3.50 and at that time we were looking at 7,000 or 8,000 (square feet)

Then we found space that we really liked at the Water Garden from a company called Epoch Internet. They had been on the market about six months trying to sublet the space. They had dropped their prices. They were paying $4 a square. It dropped to $3 and then it dropped to $2 and then it was below $2 a square foot.

So we said, “OK this is great. We’ve got to take this space.” It was 7,500 square feet and a beautiful interior view of the fountain at the Water Garden and so we thought this is our space. We started going through the motions to sublet the space. Matt was taking care of it and it was taking a very long time and we started to get very uncomfortable. I eventually spoke to the CFO over there directly and asked him what’s taking so long. And he said, “Well, we just had a board meeting. We just got more funding and we don’t want to be inconvenienced by moving our salespeople.”

So even though they had only five sales people in that office they decided to keep them there rather than move those five people. I sent them over a spreadsheet and said this is the amount of money you would save. It didn’t work. They still didn’t want to do it. It was very frustrating.

It was the beginning of the year, and we were broken hearted about not being able to take the Epoch space. We were trying to change our image to be more corporate, more professional, to match what was going on with the company. So then we started going back into the market.

This is when Perry and I would start accepting calls from the brokers. It was February (or so). Before, we would turn down most of them because we knew we wanted to be in the Water Garden. But it turned out there was no way to do a deal with the Water Garden directly, because they were not willing to drop their price. So again it looked like we would have to sublet.

Finally Matthew called, and at this point, we were not too happy because we had lost the Cooking deal and we had lost this Water Garden deal with him at the helm. So we thought, “Why are we going to do another? Why are we doing this?” But we really liked him. And he seemed more professional than anybody else we had dealt with and knew the space very well. So we said, “OK, one more time.”

We started to have Shirrell, our office manager, go out looking at space with one of Matthew’s associates. And one day Mathew called and said, “Adam listen, you can send Shirrell all day long and I could send Steve all day long and they’re never going to find space you’ll like. I need you for one day, four hours, is all I want.”

So he set up a range of tours one day. The eToys building on Olympic. Space in Westwood. Space all the way down by Main Street in Santa Monica, and actually on the Promenade. We saw five spaces in one day and at the end of that tour he said, “Now I know exactly what you want.” During this whole period, between Perry, myself and Shirrell, we saw over 20 spaces. We kept saying we liked it here and we like the Water Garden. We liked this neighborhood. We really didn’t want to go too far from the neighborhood but we didn’t think we would stay here.

Matthew Miller

Commercial real estate broker

CRESA Partners

There was nothing unusual about the real estate search. Most real estate searches involve starts and stops, properties you think you want and you don’t want, negotiations that hit dead ends. It is a process. It is very rare you see a building and just go get it. Especially for smaller tenants, the way they figure out what they want is through the process of search, evaluation, negotiation, financial analysis, refine the search, do it again.

One of the other guys in my office called them on a cold call. We met with them and introduced ourselves and learned about their company and told them about our capabilities. They knew they were outgrowing their space and they needed to look at alternatives. They were already confronted with the dilemma of simply leasing more space in the building versus looking elsewhere.

When we first started talking to them almost 18 months ago our position was the longer they could delay their decision, the more space they would be able to lease. If they moved too quickly, they would lease two or three thousand square feet and outgrow it again. But the longer they waited the more space they would have. We also were of the opinion that the market was going to fall, which was another reason to move slowly. So the idea of them taking temporary space, delaying, was in part, part of the strategy.

The idea of the Cooking.com space isn’t so much an issue of space they chased but couldn’t get. It’s space I showed them to give them an idea of a layout, and a use of space and a size of space. And they said we really like this. Is it going to be available? And I said I don’t know, we have to watch and wait and see. And we watched and waited and it never became available. It never hit the market.

Part of what you are seeing here is the difference between being inside and outside. And the only reason I knew about it was that I was also representing Cooking.

After Cooking, we pretty much toured space and re-evaluated strategy off and on for a year. About six months ago, one of the brokers representing Epoch or representing the Water Garden called them about that space. And they looked at it and really liked the space, and they started to talk to Epoch and the Water Garden’s broker about structuring a deal. I said, “I think it’s much too expensive, it’s too long of a commitment and you should do a lot better.” And they said, “See if you can get a lower rent.” And we started to put a deal together at a lower rent.

We were successful in getting the rent considerably lower. I think it went from $3.25 to $2.75. But it’s moot because Epoch decided to stay.

Their criteria for building type kept evolving. When the Epoch thing came up I pointed out that our original search criteria did not include institutional style buildings like the Water Garden. But they said they thought it was a better image for their corporate clients.

This is another really good example of why the process is effective. The clients figure out what they want by going through the search process, not by sitting in a conference room describing what they want. If you sit with a client at a first meeting and listen to what they say and take notes, and then look at the deal they ultimately do there is usually a big gap. So once they agreed they were open to more institutional alternatives we had some different buildings to look at. There were other choices at the Water Garden. There were other choices at MGM Plaza. And every month that went by there was more and more space on the market.

We do a tremendous amount of business with Equity Office, and we always let them know what we were doing. We always told them to please keep us up to speed as to what space was available in the park, what the options were, because we don’t want to rule that out.

Gail Goldstein

Leasing Director-Los Angeles West

Equity Office

CyberU started in 3,200 square feet of space right around January 2000. They had committed to a three-year deal to that particular space. But they continued to grow, and to remain productive they needed space that suited their needs.

We had an ongoing, positive tenant-landlord relationship. They felt comfortable, I think, recounting their needs to us. We were able to show them spaces in the park that might have served their needs. They certainly were trying to determine whether a short-term solution with smaller square footage made more sense or whether a larger space with growth potential made sense. Truthfully, there were probably some folks within each camp at CyberU.

It was clear in July 2001 that they needed additional space (after the Cooking deal didn’t happen.) We elected ultimately to give them the additional 1,200 feet, which again was somewhat of a Band-Aid solution we all knew, but it bought us some time to really consider how we accommodate them.

Up until about January there was definitely some decision-making going on as to how the space should be configured. They had gone from an absolutely open plan environment to ultimately determining that they needed the private office environment in conjunction with the open technical space. So that was definitely evolving through the whole process.

Everyone who dealt with the post 9-11 response was trying to understand what the market was really doing. Certainly many companies and many industries were forced to reevaluate their long-term needs, and we as landlords were adjusting to the changing market conditions.

I knew they were considering other options. We were certainly still trying to find something that would be appropriate for them within the portfolio and be as timely as we possibly could.

We wanted to make certain that we were properly addressing a client we felt was very important to us. You want to make a compelling argument about why they should stay, versus becoming a sub-tenant of a sub-landlord, not having a direct relationship with the master landlords.

We had many suites but for whatever reason, either they had thought the configuration wasn’t appropriate or the size wasn’t appropriate. The connection wasn’t made. I think we felt a compelling amount of pressure to keep them. But in the end it is their decision to make.

Adam Miller: It gets back to Gail that we are serious and we have to move. She walks into the office, and it’s obvious we had to move. People are sitting all over the place. There is no way we could continue functioning in that way. And she goes, “All right, I am going to take you to this one space.”

It was interesting because Shirrell had already showed us this space six months ago. It was over $3 (a square foot) at the time. And the security deposit was too big and they wouldn’t do any tenant improvements for us.

At this point we had seen 25 spaces. We could have been the broker. We knew what all the different prices were, what the TIs were. And I remember we stopped in front of her office, about 100 yards from where our office was, and said, “Gail, it’s a nice space, but we are not going to it unless you do this and this and this and this.”

We started giving her all these demands, and we thought there is no way she is going to come back on these demands. We said, “We would want you to get this done and that done. And we need the whole reception area redone. And we need more offices. We got to soundproof. We want new carpeting, new paint, new everything. We said we are not going to pay a security deposit. We want you to cut up these leases and there is no way we are paying more than 2 bucks.”

We thought there is not a chance in hell she is going to agree with this. She said nothing. She was laughing. We were all joking because we thought these were the most ridiculous demands we could come up with. And the next day she came in with a formal offer to Perry that almost met every one of these demands. And we thought, “Wow. These people are ready to play ball.”

Goldstein: They had obviously changed their opinion about the space they needed. The space was a good fit and a unique space that fulfilled their needs. This was a customer we sought to accommodate.

I would say that what happened in the parking lot was not a negotiation. It was really a discussion. It was more to say, “Gosh, you know this space is OK. We need this and this and this.” It was more of an exchange of needs. Then it was my responsibility to say that we can formulate that in a way that will be mutually beneficial for both parties.

You have to understand, again, we have an ongoing relationship. I consider them my friends. They have been very open about the expectations even as they were evolving. When it was apparent that the suite would really work for them and it was not something that I felt was insurmountable, it came down to the fact that this was a customer we believed in. It’s a growing customer.

They had always honored their obligations and, in turn, we owed them our loyalty in trying to find a suitable solution for them.

Adam Miller: They recognized we were one of the only growing tenants in the park, and they were losing a lot of their tenants. They had vacant spaces all over the place. And so all of a sudden the market started shifting. Perry and I and (our attorney) Steve Simon started negotiating a deal with Equity Office directly because we had a relationship with Gail.

It was a two-year deal at first, and I said if we make it a three- year deal, we would want the first year to be much lower. The offer was probably about $2.30 or $2.35 a square foot, but the main difference is that first year came down a lot.

We also were trying to get the TIs up a little bit. When we got their first offer, it was $5 per square foot allowance. Then it became $6. Then $7. They were budgeting more and more.

Then Gail’s assistant Amy walks into the office with the documents, and says, “OK Adam, I just need you to sign these and we are good to go.” And she said, “Don’t worry, it’s not the final contract, it’s just the formal offer.” It was 4 p.m. Thursday, and it said on the contract, “This offer expires Thursday at 5 p.m.”

So I call Steve and Perry and say, “Should we sign this thing? Should we not sign this thing?” And we said, “This is ridiculous, we are not going to negotiate under these terms.” We had negotiated with people who had given us exploding offers before and we said we are not going to succumb to this.

That is when Perry and I started to fight about whether to call Matt. At this point the offer from Equity Office specifically said that no broker shall be involved. And we thought if we bring in a broker now, it’s going to blow up this deal. It’s going to cost us more money. And it’s going to slow it down and potentially screw up the whole deal.

Matt knew that we were looking at this space but he didn’t know where it ranked relative to the other deals he was working on. So Perry and I said, “We got to tell him. We can’t not tell him.” We liked him and he was doing work for us. He was setting up all these tours, submitting offers, negotiating deals for us.

So we called up Matt, had a heart-to-heart and said, “We’re seriously considering this. We don’t think we can find a better offer than this and we don’t think we should wait.” And we were (still) worried that bringing him in would screw up the deal.

And he said, “Are you telling me that they specifically said, “No broker?” Then, when we told him if we don’t sign in the next hour we are going to lose the deal, he went ballistic. He said, “All right, I want you to authorize me to make one phone call.” He said, “I am calling up the chain. I have done more real estate deals with Equity Office than any other broker in Los Angeles. We said, “All right, but you have to promise us you are not going to blow up this deal. You also have got to try and not make us spend more money on this.” Because we thought we have to pay for his fees.

He calls us two days later and says, “OK, I have taken care of it. I have gone two levels up at Equity Office and we now have the same deal on the table. I am getting you better terms. I am going to negotiate better TIs and you are not going to pay my fees. They are. And that is what they should have done in the first place.”

Matthew Miller: It’s not that they tried to negotiate a lease behind my back. That is an overstatement. What happened was they wrote CyberU a proposal that did not include a brokerage commission. Somebody was trying to do a good job, got overly aggressive and made a short-sighted decision.

The whole offer was silly. It was too expensive. It had an unrealistic timeline. It had a fuse and the truth is deadlines on offers are always meaningless in this market because offers are not binding. The expiration date on a lease offer has about the same relevance as a forward in a Jackie Collins novel: nobody reads them and they don’t mean anything.

They told me about it and the reason I was upset was that it was a bad proposal and they could do a lot better. And they were worried if they let me get involved, Equity would pull the space off the market and not lease it to them at all. And I was insistent that there was no possibility that could happen.

I guaranteed CyberU that if they let me get back involved I would improve the deal, be able to be paid a normal market commission, that they would not lose the space and there would be no bad blood between them and Equity.

Within 48 hours we had accomplished all four of those things.

The deal improved by about $100,000. It was a combination of lower rent, a leasing commission, tenant improvements and a number of deal points affecting operating expenses, such as the allowed density.

[The final deal was for 11,557 square feet of space, for three years at $2.27 per square foot, full service gross.]

There is a myth in our industry that somehow it costs more to have a broker involved. But anybody who has been through this knows that is not the case. It’s not as if the landlord is going to take the tenant brokerage commission and roll it into the deal and you are going to improve it by that much.

Goldstein: Some of the counteroffers occurred because they actually wanted to look at different options of length of term. It wasn’t so much that the deal was changing as much as what does it mean if we take another year. How does that affect things? I would say that overall they were looking at a number of different options as it related to what worked best for their business. How long their suite would accommodate them, given their growth perspective.

(The exploding offer?) I would think what they are referring to is when we provide offers to clients they have an expiration time on them. While we were anxious to accommodate CyberU we needed to be able to know the viability of the transaction.

(As far as not having a broker involved,) that came out of previous conversations where on several occasions I had asked right up front, “Do you have broker representation and would the deal contain a brokerage commission?” To which they replied no.

But it’s absolutely true that Matthew’s involvement was valuable in that he helped us all reach a finish line. I think he helped by giving his third party market perspective on the transaction. Up until that point we were having difficulty reaching an agreement between the expectations of the customer and the expectations of the landlord. I think he helped quantify what might be an appropriate finish line.

Adam Miller: We ended up negotiating a turnkey deal on the tenant improvements, where whatever specs we agreed upon were getting done by Equity Office. Everything else we paid for. So all of a sudden the onus was on Perry and I to think of every single thing we wanted done. We started coming over here multiple times a day with our contractors, with their contractors, with Gail, with the architect.

So we negotiated this office, redoing the reception area, whether they would pay for the door or we would pay for the door. Where the outlets were and how many we got. Whether or not we could demolish walls. How we built the extra offices, where we added extra space.

At one point, Perry brought in his sister-in-law who used to do space planning for Kinko’s, and she came up with a whole bunch of things we hadn’t thought of. And so we had to go back to Gail after we already had the list of what we wanted.

It all happened very fast, about two weeks. And in the end we got to stay in the same office park, pay far less than we could have imagined, do a deal with the same management company we liked working with, continue to work with all the same people and get 15 offices for all the sales and professional services people, plus additional offices.

And we created a completely open space area on the other side of the office (for the Web developers) so you have all the noise in one area and they get to do what they want and be as creative and loud as they want. And a completely corporate feel on the other side.

Steve Simon,

General counsel, VP of business affairs

CyberU

We are on the phones all day so one of the things we wanted to make sure is when we moved we weren’t leaving ourselves high and dry. A lot of times it takes the phone company a while to put in the T1 and the phone lines and things like that. So one of the things we wanted to make sure was that we were not moving into this place even if the tenant improvements were done until that T1 was in there for voice and data.

Basically we (negotiated a clause that stated) we would move in when the TIs were installed. I think it is a little bit unusual, but they knew it was going to take them a little bit of time to build out the T1. I am not a real estate lawyer, per se. I don’t see 500 leases per day. But in my short experience, it’s not something I’ve seen.

Gregg Miller

Real estate attorney

Wilson Sonsini Goodrich & Rosati

Palo Alto

I had reviewed CyberU’s original lease in that project. And then they added space without my assistance. When this one came up they called me. In a sense I was the guy who did their lease in the first place and when it came to expand significantly they called me to assist them.

The old lease I had negotiated in a much different market back when things were really beginning to heat up in California. It certainly reduced the negotiation time because the base document was not really open to re-negotiation. We tried but they really wanted to streamline the process and they didn’t want to go back and look at that.

Steve and the CyberU guys had obviously looked around and felt the terms economically were good. And they didn’t seem out of line to me.

Leases are, generally speaking, very one-sided, landlord-friendly documents. So from a tenant’s perspective it’s good to soften them up give you a little bit more flexibility and grow and change and do the things you need to do as a business without being constrained by the lease. I was able to point out a few things that helped them get a better deal. It was all just a bunch of little stuff that in aggregate helped them out.

Amy Wallack

Interior designer and space planner

The building owner has its architect. He had drawn up a basic floor plan where they thought people should go and I went and looked at that.

People would have sat in the reception area and looked directly into the conference room, so we changed that. Now, you still have visibility for people in the conference room, but they are looking more at the receptionist.

They had a second little private conference room that in order to get to you had to walk all the way around and go into their (interior) space. We changed that and put in a door directly off the reception area.

They didn’t really have a color scheme. I came up with gray for the carpet so that it would tie in everything and not show dirt. They have something that coordinated with their existing furniture.

The client always has good ideas and sometimes they know what’s best because it’s their corporation and they know what they need. But sometimes because they don’t do space planning all the time they don’t see things.

Maybe your accountant needs to be in a private secure office. That is another thing we talked about, making sure the offices were soundproof so when you are interviewing somebody you can’t hear what is going on.

Ken Mayer

Architect

Architectural Charettes

I have worked with Gail for about 15 years. Basically I have become part of the leasing team, although I am an outside contractor, an independent architect. My job is to meet with the client, the prospective tenant and find out what he needs. Of course I do work for the landlord. It’s a balancing act getting the tenant’s needs met but keeping in mind that this was a turnkey.

With CyberU we knew where we wanted to move them in advance. We had the space picked out that we felt would meet their needs. I had already done the field measurements on the suite. There was a lot in the suite that worked as it was.

We had to modify a bit of the entrance for their needs. Now, most of the clients that come in don’t have to go through the (interior) space to get where they are needed.

It was just a matter of listening, and then there is fine tuning that goes all along the way. They needed a room with a strong computer system because of what they do. So, fortunately, that suite also had a lot of transformers and some stuff that was already there and worked well for what they were doing.

Getting the design the tenant wanted was most important, and the numbers worked because there was a lot of existing conditions that we could use.

Perry Wallack

VP of Finance

CyberU

The technology that needed to be in place included wiring and cabling the whole office for both phone and data. It probably took 150 man-hours to just cable the office, running wires from different wall outlets up to the ceiling and then over to the server room, then terminating all of those to the proper equipment in the server room.

Then there’s the third party connection of all those data and phone lines, so for data you need an ISP. (Contractor) UUNet will only guarantee a data T1 line to be installed in 45 business days. So if you order the T1 line the day the negotiations close, you could be nine weeks out for your move. In our case, we were gambling a little bit, so we had actually initiated the order for the T1 well before we had finished the negotiations. Fortunately, it was installed in 10 business days.

We were supposed to be done between May 7 and May 15, but the leasehold improvements took longer to get done than the property management company had originally thought, by about two weeks. And they told us they needed an extra three weeks so we gave them that consideration and just figured we’ll move in the last day of the month or the 30th.

There’s a series of inspections from the city of Santa Monica that are necessary, and I was intimately involved in the process but I can’t really tell you I totally understand it. This is local government at its finest. You have to do an inspection after each step in the construction process, and this gets pretty granular, if when you put up drywall, you have to screw the drywall to the studs. Well, they actually have a city inspector that comes out and makes sure that you use the proper number of screws and put them the proper number of inches apart to attach the drywall to the studs. I don’t know if it’s all cities or just Santa Monica, but the level of detail that they go over with the contractor is pretty heavy.

It took about 10 or 12 guys a day and half to paint the office, but you can’t do that until all the other inspections are done, because if you do, you may have to tear down a wall. It’s the same thing with the carpet. If you laid the carpet before the painters get there, it would ruin the carpet. Everything has to happen in a process.

Mistakes will happen

When you have a new data line or T1 for voice-install, the phone company comes out and does their thing and you can have a third party come out and terminate into your server, but that doesn’t mean it actually works. What you need to really do is run the connection through your telephone equipment or computer equipment to make sure it works. We did that with the data line.

But for the phone side, we couldn’t do that because we only had one phone system. The third party phone provider that we used was confident that based on the number of times they had done this, that the transition would be seamless, and when we called the phone company, our old phone numbers would move over to the new address.

Well, lo and behold, the voice T1 line wasn’t right. There were several problems with it, the most basic of which was the forwarding phone number they had given us was somebody else’s. Also, the voice T1 was not terminated into the proper part of the building. So that was one thing that did not go right.

The improvements were negotiated turnkey, so that every improvement has to be documented on the blueprint, down to any customized paint colors that you want, any customized carpet and the areas for that carpet. Because if you budget that job, the cost is completely covered by them. And if they price it out wrong or if it runs over, they pay for it.

They say “don’t talk to our guys because they’re going to do exactly what’s on this plan and nothing more.” But because of our relationship with the property management company, I was able to go over there and check on things every day or every other day to see how it was moving along. Number one, we had a timetable and number two, we had to see how the actual improvements we agreed upon and documented on the blueprint looked in real life. Sometimes those are two different things.

The contractor won’t put anything in that’s not on the blueprint. But sometimes it’s like, “well, this wall is supposed to be at such-and-such angle and it’s supposed to be eight feet long, and let’s just make it nine feet long and change the angle.”

When you’re there on a daily basis, the contractor can call the property management company and say, “hey, listen, they’re changing a wall by a few feet, there’s no labor or material cost, so we’re going to do it for them.”

Adam Miller: Four weeks ago, they said they were going to do the TIs in two weeks. We were supposed to move May 15 at first it was May 1, and as the negotiations dragged on it became May 15 and they said, ‘no problem, we will definitely have you moved in May 15.’ On May 7 (Equity Office) said there is no way you are moving May 15. So we said, ‘all right, May 23.’ And then they started hemming and hawing, saying, ‘it’s probably not a good idea to bank the business on May 23. So we said, All right, we have to move on a weekend, or towards a weekend.

We had thought we would not be able to make the May 15 move because the wiring wouldn’t be done. But we ended up getting (the T1 line) on May 1. So it was very ironic because we were ready to go way before they were. And then they started with the delays. So Perry would be coming over here every two days, and say, ‘why isn’t this done yet?’

We didn’t buy much. We put in an order for a couple of things. We were going to get marble for the reception area and we found out marble is too soft. It stains and chips and breaks. You had to get granite.

Goldstein: The scope of the negotiations took longer than expected, but once the deal was struck it moved fairly quickly. We were looking at a suite that was going to accommodate growth for them in the future, and we worked diligently with them on a number of modifications just to make sure we had every bit of the improvements documented properly because it was a turnkey (lease).

Our architect (Ken Mayer) and I were working with Perry and Adam directly just to make certain that we had all of the details and plans correctly. I just really didn’t want to see anything fall through the cracks.

The original tenant improvements were supposed to begin around May 1. The lease document itself was delivered to the client on April 25, so it was a bit later than we might all have hoped. But we were able to effectively complete the tenant improvements somewhere between four and five weeks, which was fairly aggressive considering the work that was being done and the level of work that had to be completed in the space.

We were very fortunate that as CyberU’s space requirements evolved, the suite provided them the office component and the executive environment that they were looking for. The layout was pretty good.

Kevin Turner

Superintendent

Fine Built Interiors

It was a fast-track job. Normally I like to get six to eight weeks, and we did theirs in about five. But they were really helpful. They’d always come over, and if we had any questions, they’d give an answer then and there.

They were in the building the next block over, and it was a very small suite compared to what they have now. And if we had any problems, we’d just go over to their suite and ask them questions, and they’d say, ‘let’s go over and take a look.’

We demolished the walls so we could reconfigure the room the way they wanted it. Most of it was existing. We reconfigured their waiting room, two conference rooms and we added three offices.

(Santa Monica’s physical inspection practice) is basically the standard no matter what city you’re working in. We have to go through this every time we do a build out, and we did everything to code and didn’t have any problems with the inspectors at all.

They did have a very stringent recycling program, where you have to recycle 60 percent of construction debris. We basically threw it in our dump truck and took it over to the recycling center, and they sort it and recycle it. It was the first time we had to deal with that, and we had to put a deposit down, and you get it back when you establish the percentage of recycling they require.

Dewayne Desrosiers

Move Manager

BKM Total Office

I was contacted by them in March. I went out and took a look at their facility I walked the area to see what they had and I came back and put a proposal together for them.

At that time they were not sure they knew where they were moving, whether they were looking to stay close within the area. They talked to me about a couple areas they were looking at, and one of them was right down the street.

Goldstein: They wanted to be up and running, and to the extent our team could assist them without compromising our other customers to do so, we were there for them and wanted to see it realized.

You’re making sure everyone is up to speed, whether it’s building security or parking control or outside vendors or janitorial services. Once the lease is signed, the property management team takes over, and it’s a seamless transition.

Sometimes you’ll see a weekend move that might be a day and a half. CyberU’s needs were a little bit quicker and I think they were real concerned about getting in and getting operational.

Perry Wallack: For a technology company, when you are down, the opportunity costs of every lost hour is enormous in terms of real dollars going to waste because your people can’t do their work. When you’re a software development company and you have product releases that are weekly, biweekly or monthly, when you lose one day out of the cycle of that release, that can be a significant percentage.

Moving during the weekend never came into consideration. I don’t know if we thought it was an imposition on the employees, or what. A lot of the service providers that are necessary to get the technology up and running don’t work on the weekends, so when it came to switching our phones or our data lines over, we needed to do all that during the weekday. We could have done that on a Friday, but if something gets screwed up, we don’t have any time to fix it.

We unplugged Thursday at noon, and we were back up and running and moved in at 10 p.m. Thursday night. When people came in Friday morning, they plugged their computers in and were able to make a phone call and or use their computer and do what they needed to do.

Also, having the employees involved in the move allowed for a quicker move people can pack up their stuff and if they have specific files or current work that they’re doing, they can actually walk it over to the new office. We were moving just two buildings down.

Having the supervision of several of the managers during the move-in process was helpful because things get moved into the right places on the very first try. If you’re not there, you get to work Monday morning and you have 20 or 30 boxes on the other side of the office.

The move was budgeted for eight hours. It took them eight-and-a-half and they underestimated the amount of furniture and equipment that we had and did not bring enough trucks. They brought a three-quarter truck and an 18-wheeler, and they loaded them both and they couldn’t fit everything. It wasn’t a terrible problem because we were three buildings away so when we drove back there, we didn’t lose a whole lot of time but in the event that you had a long commute, that would’ve wasted a lot of time.

Desrosiers: They did their own packing. I had a crew of two come in at noon to relocate their servers and some other computer equipment that they needed to get over ahead of time and they came back and started dismantling the desks. At 4:30 the remaining crew came in and started to dolly up everything so that at 5 o’clock, they were ready to roll. We couldn’t move anything out of the building until after 5 p.m. that was property management rules.

We often do things within a day it all depends on the size of the move and what kind of work is involved in it. They had no cubicles to install so it was all standard furniture. They had roughly 35 desks, a conference room, some file cabinets, chairs, storage typical stuff.

It’s really the client’s push to have as little interruption of their staff as possible. A lot of clients go for the weekend but it’s all driven by the client and depending on what situation they’re in.

I had a total of eight men. If it’s after 5 p.m., I try to get as many men on as possible so that we don’t go too late into the evening, so that’s about standard.

The building management was real cooperative. The 24-Hour Fitness Center was close (to the old offices), so parking was a little bit of an issue as far as getting the truck in and out of the lot there were cars in there at all times at night. Other than that, we had no issues, it was a really simple cut and dried job.

Adam Miller: We decided that we wanted to move on a Thursday, because we would have to move at night and we wanted to have an office warming party the day we moved in. And so we moved on a Thursday. My birthday was that week also.

It was tough. The phones were supposed to take a couple of hours. It took eight hours. It took seven hours to get the computer up. The movers were supposed to come at three and they came at 4:45 p.m. We had planned that people would come back at 6 p.m. because we thought the move would start at three, to help unpack. So we sent everyone home at 2 p.m., and brought half the people back. The movers didn’t get here (at the new office) until 8 p.m. and then the guys took a quote unquote lunch break at 9 p.m. They unloaded two trucks but still had to go back and get more stuff. At about 10 p.m.

There were five of us here with the movers until 12:30 a.m., and at 1:30 Perry and I left. This morning people came in about 8:30 and started unpacking. By 11 a.m. everyone was working.