Mark Rauch's Tenant Rep Times July 10, 2013
Southern California Tenant Representation
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 Greetings!
Welcome to the "Tenant Rep Times". You are receiving this edition of my eNewsletter because you rent or own commercial office space and are either my client or a potential client. I trust you will enjoy this issue and get a "gem" or two out of it.
Your email address will only be used to communicate with you and will NEVER be sold, shared, rented or otherwise provided to other entities. |
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Jumping Over Dollars To Collect Pennies
Presented By Mark Rauch
"It's always to early to quit" -Norman Peale-
Over the years Landlords have excelled at getting their Tenants to only pay attention to their face rental rate and forego the effective rate which impacts the overall economics of the lease. My problem with this basic approach is that it leaves out the numerous other issues that encompass the actual cost of a lease.
Ask yourself these questions to help determine if you can evaluate your true leasing costs:
- What method of measurement was used to calculate the rentable square footage you're paying on?
- Was that measurement confirmed?
- When you receive your annual operating expense reconciliation statement from your landlord, do the charges make sense?
- Does the landlord have the right to require you to restore alterations, and how much will restoration cost you?
- How much in fees and "profit" splits will you incur to sublease?
- If you try to sublease a portion of your facility, can the landlord terminate your lease?
- How much will it cost you to make changes to your facility?
- Can the landlord relocate you and what costs would you face if you had to move?
- What are the landlord's obligations regarding code requirements?
- Who is responsible for hazardous materials?
Tenants who center in on the rental rate while not competently assessing the other aspects of the lease which will affect their total overall costs and liabilities expose their company to unforeseen expenses.
By hiring a seasoned Tenant Rep that will implement the right process, Tenants can minimize their true costs of occupancy and know that they are protected.
Please contact me to discuss your office space needs.
Nothing contained herein is to be considered legal advice. Always seek legal advice when evaluating any legal document.
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Case Study
We represented an Insurance Company located in Los Angeles in a relocation. The owner really did not want to hire anyone to represent him as he had always represented himself in leasing space. After two years of staying in front of him he ultimately decided to give us an opportunity to show him what value we could bring to the table.
By the time our client hired us they were occupying approximately 38,000 rentable square feet which was spread out throughout the building in small and medium size suites none of which were contiguous. Our client just kept leasing available suites as his company kept growing. To make matters worse, the particular building our client was leasing is a mid-rise building which is very long and narrow. They had to walk pretty far to get from one department to another. In addition, the property was recently purchased by a well known Landlord known for mismanaging their properties. The one positive to the situation was that the lease rate our client was paying at the time was very low which was a primary plus to our client.
Our assignment was to locate a higher quality office building within close proximity to the existing building that could accommodate approximately 60,000 rentable square feet with a lease rate equal to or better than the current rate.
Knowing that a very large company recently vacated one of the premier high-rise buildings in the area, we contacted the Landlord and embarked on what ultimately took 7 months to negotiate one of the most aggressive lease transactions at the time.
Based on a 7 year term, we negotiated a very below retail lease rate, over a year of free rent, reduced parking fees and an extremely generous tenant improvement package with the ability to convert improvement dollars to more free rent. In addition, we negotiated superior non economic terms as well.
At the end of the day, the overall effective rate did end up being below the rate our client was previously paying. Our client was incredibly happy.
Mission accomplished.
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Question: Mark, how do Tenant Reps get paid? Answer: Tenant Reps are paid a commission upon the signing of a lease. The commission is paid by the owner of the building and is paid one-half upon lease execution and one-half upon tenant occupancy. The commission is most often calculated as a percentage of the aggregate value of the lease and is usually four percent (4%). For example, if a Tenant signs a 3-year lease for 2,000 square feet at $24 per RSF per year ($2.00 per RSF per month), a 4% commission equals $5,760.00 (3 years x 2,000 RSF x $20 x 4%). The individual Tenant Rep will then receive a percentage of the total commission from the "house"
I also want to reiterate that we are requesting meetings with Professional and Corporate Office Tenants
We are looking to represent a handful of Tenants, each occupying 5,000 rentable square feet to 500,000 rentable square feet.
Please call or email us to schedule a time to discuss how we can help. The only way to help you is to hear from you. Please don't keep me a secret. Other than representing you, a referral is the greatest compliment I can receive. |
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My focused specialty is solely driven to advocate the office space interests of Southern California-based corporations and professional services firms in leasing and purchasing negotiations of all types-renewals, relocations, renegotiations, recasting, subleasing, terminations and investments on a local, regional, national and international basis through a network of offices in 200+ markets around the world.
Assignments range from single office lease transactions to national and multi-national real estate portfolios.
It is my sincere desire to develop meaningful, long term relationships as your trusted
Tenant Rep Consultant and friend.
Regards,
Mark
Thank you for taking the time to spend a few minutes with me.
Sincerely,
Mark D. Rauch
Senior Vice President
Travers Realty Corporation
Direct: 213-430-2469
Mobile: 818-943-2959
mrauch@traversrealty.com
License # 01019455
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