Tips on Using a Tenant Representative

Your primary business is running your company. How often do you lease office or industrial space? Hopefully, you don’t have to do so more than every 3 to 5 years or so; the same with lease renewals.

The bottom line is that you rent commercial space only a few times in your business life. Landlords on the other hand rent space over and over again. In most cases, they even hire a listing agent to help market the property and advise them. Do they have an unfair advantage? You bet they do. How do you balance this unfair advantage? Engage the services of your own qualified tenant representative.

Many tenants have a fear that by engaging the services of a tenant representative they will end up having to pay more in rent so that the landlord can pay the tenant representative. I am sure you have heard the sales pitch from an agent that engaging a tenant representative doesn’t cost you anything. The response I hear to this is “the landlord tacks on the fee on top of the lease rate.” So, who is right?

When it comes to negotiating for office space, there is no question that a good tenant rep will not only save you money, but will also make sure you don’t make any critical mistakes.

Not to mention, there is usually already a real estate fee built into the asking price. This is paid whether or not you have representation. Typically, what happens is that the fee, usually 4% to 6% of the gross lease amount, is split between the tenant representative (leasing agent) and the listing agent. There really is no additional fee tacked onto the lease rate and you won’t save anything by not having representation. The listing agent, who represents the Landlord – no matter what they tell you – will get the whole thing.

What about lease renewals? Should you also engage the services of a tenant rep? Absolutely! How a tenant representative gets paid on a renewal is negotiable. Should they be paid a full fee on a renewal negotiation? The answer depends on how much work is involved. If is just a matter of going out and doing a market survey then negotiating the deal, they probably don’t deserved a full fee. Most tenant reps will work as consultants either hourly or for a predetermined flat fee. On the other hand, if you want to consider other alternative locations, request proposals and do some preliminary negotiations on other properties, it is justified. It is a comparable amount of work that would have to be completed if you were moving. Or at least a half of a fee is justified, the leasing side of a commission.

How will a tenant rep save you money?

1. The leasing process is generally complex. After labor costs, your investment in office space may be your most expensive line item and decisions you make will have an impact on your company’s profitability. The tenant representative is your guide through the process.

2. Market knowledge is a key ingredient in which a qualified tenant representative can make a big difference. Having a grasp on asking rates versus deal rates and incentives available is important to make sure you get the best terms available.

3. A qualified tenant representative understands the numbers and is able translate data into implications for your business – advice on growth strategy within a particular building or market, for example. Tenant representatives are also able to perform financial analysis to help you select the most cost effective location.

4. Expert negotiation skills are critical for a favorable outcome. Representation gives you subtle leverage during negotiations, informing the landlord that you are professionally represented and undoubtedly advised of alternative sites and comparable lease rates. As an added benefit, a tenant representative may know the temperament of a particular landlord and/or landlord’s representative, and recognize how far to push the negotiations without jeopardizing the transaction. This is a definite advantage when it comes to lease renewals, too.

5. Familiarity with the documents is a must. Tenant representative have a working knowledge of the documents necessary to conduct the transaction. These documents include requests for proposal, letters of intent, lease agreements and workletters and vary from market to market. A tenant representative knows how to customize the documents to meet your needs.
Source: James Osgood – OfficeFinder

Colorado solar-panel makers labor to lead the pack when demand rises

By Mark Jaffe The Denver Post
10/18/2009 01:00:00 AM MDT

Even as the solar-cell industry struggles through its first decline in demand in more than a decade, flatbed trucks are hauling about $100 million in equipment to Ascent Solar Technologies Inc.'s new plant in Thornton.

Even as solar-panel prices dropped 40 percent in 2009 to about $2.25 a watt on average, abound Solar Inc.'s Longmont plant is rolling out its first photovoltaic panels. While it may seem the two Colorado companies are sailing into a head wind, they are just ahead of a spate of others. Plans for 15 new domestic solar-panel factories have been announced this year.

For the full article: http://www.denverpost.com/business/ci_13582493

Obama Administration Worries About Commercial Real Estate

From: TheAtlantic.com

Obama Administration Worries About Commercial Real Estate

Oct 16 2009, 2:24 pm by Daniel Indiviglio

According to a new report, the Obama administration is beginning to sweat over problems in the commercial real estate market:

FOX Business has learned that President Obama has been briefed by his economic team on widespread concerns for commercial real estate loans, an issue many believe could trigger the next banking crisis. The briefing occurred as many on Wall Street fear commercial mortgage-backed securities, commonly known as CMBS, will be the next set of loans to begin placing stress on banks' balance sheets.

I've written about commercial real estate's woes several times in recent months. But this marks the first time I've heard about the Obama administration starting to worry. That's significant. It's one thing for the Federal Reserve to worry about markets -- that's its job. To give the President notice could involve far more tangible fears.

How much does commercial real estate matter? A lot. The Wall Street Journal noted last week:
Commercial real-estate loans are the second-largest loan type after home mortgages. More than half of the $3.4 trillion in outstanding commercial real-estate debt is held by banks.
In other words, the market we should least like to see go bad after residential mortgages is commercial mortgages, and that's exactly what's happening.

We might see a preemptive strike to try to stop the bleeding before another banking crisis occurs. But given the fact that the Fed has already thrown a fair amount of money at CMBS through its Term Asset-Backed Securities Loan Facility, I'm not sure what the next move would be. But someone working in the Treasury might be devising a commercial mortgage bailout as you read this.

Commercial Real Estate's Impeding Doom - Bloomberg

Here is vary insightful video on the growing concerns on the Commercial Real Estate Finance industry.

Commercial Real Estate's Impeding Doom - Bloomberg
http://www.youtube.com/watch?v=RVYK2_NBI9E&feature=related

New Investment Listing!

The Abound Solar building is a freestanding industrial facility strategically located just north of Denver, Colorado along Interstate 25. Originally built for Applied Films Corporation in 1998, this Class A Manufacturing Facility was leased to Abound Solar in 2008.

Purchase Price: $10,500,000 ($83.17/SF)

Investment Values: 8.2% CAP; 20% Leveraged IRR; 17% Initial Cash-on-Cash

Seller Financing: The Seller, First Industrial L.P., would consider financing the disposition of this asset for a qualified investor at attractive terms.

Property Size: Building – 126,385 SF; Site – 7.66 Acres

NNN Lease Term: April 1, 2008 - October 31, 2015

Property Features: Facility upgrades include Heavy Power, Chilled Water System, 100% Temperature Controlled Space, Upgraded Lighting and a Compressed Air System.

Investment Memo: http://www.bitzerrep.com/pdf/Investment_Memo_9586_E_I-25_Frontage.pdf

CMBS Loans Coming Due

Finally Congress is getting concerned with the CMBS market and the $150B in Commercial Real Estate loans coming due in 2012! Click here for today's GlobeSt.com article: http://ow.ly/nV4a

Concerns for Commercial Real Estate

Here is a great article that discussed the looming concerns for commercial real estate across the country for the next several years.

Faltering Property Values Hamper Commercial Mortgage Refinancing Efforts

Aug 5, 2009 6:29 PM, By Sibley Fleming

While there’s been a lot of buzz surrounding the “2011 issue” — a term coined by commercial real estate experts in reference to $296 billion in maturing loans originated in 2006 and 2007— refinancing some $250 billion in loans coming due this year holds no shortage of drama.The percentage of foreclosed commercial mortgages held by banks at the end of the second quarter more than doubled to roughly 4.3%, or $7 billion total, compared with a year earlier, according to estimates by Foresight Analytics. The research firm projects that percentage to reach 4.6% by the end of 2009.As valuations and net operating income continue to decline and debt financing remains scare, borrowers are feeling the pinch. Valuations are reaping the most havoc on maturing loans. Since peaking in October 2007, asset values have plummeted 29.5% year-to-date through April, according to the Moody’s/REAL Commercial Property Price Index.

Click here for the full article on the National Real Estate Investor Web site:
http://nreionline.com/news/maturing_loans_2009/

2Q2009 Denver Commercial Real Estate Newsletter

Our 2nd Quarter Denver Commercial Real Estate Newsletter is now complete! Now is a terrific time for Tenant's and well capitalized buyers to take advantage of opportunities in the marketplace. Follow this link for a full copy of the newsletter and please contact me to discuss specific strategies. http://www.bitzerrep.com/pdf/BitzerNewsletter2009Q2.pdf