The Vital Service of Representing the Small Business Owner in CRE Lease and Purchase Transactions Why Using A Tenant or Buyer Rep ONLY Broker is the Best Approach!

After having worked in Commercial Real Estate mainly in the brokerage sector for more years than I wish to admit and had finally started my own CRE Brokerage Company 13 years ago, I decided to become a Tenant or Buyer ONLY Rep. Why?

You can read my Career history on LinkedIn.com or on my Website CACommercialRealty.com, and you will find that I had a very varied background. I had made some mega deals and represented millions of square feet worth of transactions. I had owned and managed commercial properties as well, providing me with invaluable insight as to the “Mind of a Landlord”. I have divested all my ownership positions years ago!

Back in the day, the practice of representing both tenants/buyers and landlords/sellers was OK, although occasional problems would arise. Then came the advent of the Exclusive Representation of Tenants or “Tenant Rep” Brokers. Is there an inherent internal conflict of interest within these Brokerages? Yes, in my opinion, there still is, but more updated Real Estate Licensing regulations began to change to address this issue. But these conflicts still remain!

I realized there was an underserved market and I had started to represent small entrepreneurial, sole proprietor owned companies, this segment of the market needed a lot of help. The big Corporations had many resources at their disposal to handle CRE, usually hiring the Large National Brokerage Firms.

This is where we are today. To me, and many of us that only work for Tenant/Buyer Representation companies, don’t have such inherent conflicts. We only want to find the best space, rent/price, and terms that can be negotiated for our client, period. We don’t care which property is chosen, as long as we know our client is making an “Informed Decision”, meeting their business needs and is “Happy” with their location decision. Part of the service is knowing the market in terms of market rent, availabilities, the particular building’s profile in terms of age, location, amenities, pluses, and minuses of the property and the landlords and their respective reputations with respect to dealing with tenants. Also knowing the limits of what can or cannot be appropriately negotiated depending upon each client’s needs.

These NEW “Entrepreneurs” wanted to be their own Boss or had a great business idea they wanted to make actionable. Whatever the reason, there was one very common theme that became very apparent. These Entrepreneurs/ Small Business Owners had virtually no resources when it came to finding, negotiating, financing, understanding formal legal obligations (Commercial Leases for example). As a result, I have witnessed first hand how many small business owners had gotten into financial trouble or even failure, creating life changing circumstances and ramifications strictly due to not knowing the “process” and what to be on the lookout for that could potentially ruin their businesses within the context of a commercial lease.

“You don’t know what you don’t know” “It’s not just about the Rent!”

 Many small business owners haven’t a clue as to what they are signing in terms of a commercial lease. They have zero idea of what could be possibly negotiated in their leases. Because so many other factors within the lease can torpedo a tenant’s success sometime in the future. To have seen firsthand, when a small business owner signs a lease which is heavily tilted towards the landlord, and business circumstances even minor ones come up, could create situations which can become financially catastrophic, this was and is not acceptable in my mind.

 

Many small business owners believe they are protected due to being an LLC. That could not be further from reality when it comes to a commercial lease.

In addition to all the above, most small business owners don’t understand the ramifications of signing to personally guarantee a lease. What is their ultimate risk if they fail and had to close their business! Not every landlord has empathy or cares what happens to these small business owners who in all likelihood put their life savings or much of their financial resources, including retirement money into their business and their lease obligations. When you read about large Public or Private Companies going under, terminating leases early, defaulting on their debt and such, there are no personal liabilities unlike that of the small business owner. Part of “What I Do” is review every lease or sales contract to; A) Make sure the terms of the LOI are accurately represented in the lease or contract B) Point out the most egregious lease/contract clauses and C) Offer solutions and modifications which bring a balance into the lease/contract agreement. Most attorneys representing my clients will accept my suggested changes. This alone saves my client time and legal fees. 99% of the time I will have reviewed the lease and submitted my comments well before the attorney evens opens the document.

The real problem was and still is the small business owner’s lack of knowledge about the entire process from beginning to end. The small business owners I represent have mostly never been involved in finding commercial space and all that was involved. This includes first-time Franchisees.

Therefore, my “Plan” of how I represent these small business owners and I mean ALL, no matter what their demographic background or size of their space needs, if they own a business I will be there to help and provide the following outlined below.

The only requirement I have to begin representing the small business owner is they have two (2) things at the ready, 1) A formal Business Plan and 2) Financial Statements.

Without them, there is no use in beginning the process as they are essential for multiple reasons.

The “Plan” which I employ…

  1. Education as to the entire process
  2. Interpreting legal terms and conditions into plain understandable English taking out the legal mumbo jumbo and noting the real-world ramifications of
  3. Knowing what to expect during the
  4. To try, to the best of my abilities, to negotiate a “fair” and balanced deal/
  5. Help by recommending other professionals such as attorneys who are both CRE centric and are not going to over charge my clients while fully representing our mutual client’s best interests, even if means a deal is lost due to intractable and draconian lease terms. I will help to find proper financing if the situation requires at no additional
  6. Bring experience, market knowledge, strategies and an ultra-high level of communication with the client

CA Commercial Realty created a “Manual” which is intended to be a self-help guide for the small business owner to educate them on the entire CRE process from start to finish. It is complete with CRE definitions, legal forms, how to lessen personal guarantees, what questions to ask prospective landlords, negotiating tips, knowing timing issues that may arise, and so on. This self-help guide was written for the three (3) main property sectors, Office, Retail and Industrial. The reason is that each property sector is unique onto itself as to lease terms, rental rates, landlord-tenant responsibilities, and so forth. As part of my belief in educating the small business owner I also conduct FREE Seminars for local economic development entities such as the Women Business Centers of Maryland, and Economic Development Programs which are teaching the aspiring entrepreneurs the basics of Business 101 as well as conducting webinars for consulting groups I am a member.

If you would like to have a no cost no obligation conversation with me, kindly contact me and you might come away with some important insight and information. I can also help if you are nearing a lease renewal and/or lease extension by negotiating new terms & conditions which may have been overlooked the first time around. Or if you are just looking to move.