Mega-Mergers Should Prompt Questions About Service

This month, two prominent commercial real estate companies, Jones Lang LaSalle and Staubach Co., merged, making official an event that has been rumored to occur for almost a year. Staubach operated primarily as a tenant-representation firm throughout North America. Jones Lang LaSalle offered an array of "full services" around the world.

Staubach was a tenant representation stalwart that held firm to the idea that the best way to service tenants was to do so without the conflicts caused by managing and listing property. Now that has all changed, providing the national marketplace an opportunity to re-examine the value of working with real estate professionals that practice tenant representation exclusively.

The appeal of exclusive tenant representation is that a customer needing space is assured that the advisor is focused strictly upon meeting their needs. In exclusive, "boutique" tenant rep firms, there are no conflicts of interest that occur when a real estate company also offers leasing and management services and as a result, has agents on both sides of transactions. That practice undermines any promise made to serve tenant exclusively.

Exclusive tenant rep professionals understand fully the regional and local leasing trends because the very nature of their practice keeps them active and alert to the deals and relocations that define the space market. They are not, however, saddled with the burden of serving on several full-service teams or helping a landlord market his building.

Real estate law dictates that the real estate firm is a client's agent. Thus, if your real estate firm also represents the interests of building owners, then your agent (despite appeals to the contrary) is not an exclusive tenant representative.

The most successful facility relocations are rooted in tenant representation relationships that function as partnerships, not merely "agreements." With a single, dedicated focus and by not representing landlords, exclusive tenant representation firms offer the best opportunity for a company to secure the most productive and beneficial occupancy solution.

 
Banks Basking in the Growth of the Sale-Leaseback

While their role in our financial fluctuations has many faces, banks are also strategizing ways to improve their financial situation, and they're using a commercial real estate strategy to do it: the sale-leaseback.

A sale-leaseback is exactly what it sounds like. A company that owns its business property chooses to sell it to an investor in exchange for receiving a long-term lease to the property. The investor receives an income stream from a credit tenant, and the selling company unhinges brick-and-mortar assets from its balance sheet. For banks in today's market, a sale-leaseback most importantly creates liquidity.

Banks are ideal sale-leasebacks prospects because extensive branch systems typically make them intensive commercial real estate users. A sale-leaseback can allow them to dispose of bundles of branches at one time to any number of national investor groups currently targeting sale-leaseback investments.

In April of this year, SunTrust bank finalized the total sale of $736 million in property as part of a sale-leaseback, signing leases for 10 years with flexible renewal options. The deal consisted of 2.2 million square feet in 433 properties. Other industries are following suit, using the strategy to create liquidity as the economy grinds through the summer months. Earlier this month, AT&T sold and leased back their 995,000-square-foot Lindbergh Center in Atlanta.

Besides retaining control of the property, a company can write-off the full lease payment each month as opposed to just the property depreciation and interest in their mortgage payment. Keep in mind, however, that investors will typically seek a NNN lease. This means that taxes, utilities and any common-area maintenance will still need to be paid each month by the tenant.

There are many technical facets involved with sale-leasebacks and they are not always a cut-and-dry process. It¡¦s important that you work closely with your tax advisor to understand the more complex components involved.

 
U.S. Green Building Council Revamps Program for Existing Buildings

As LEED certification for new construction expands wildly across the U.S. and Europe, achievement of the standard for existing buildings has been languishing. With a difficult-to-meet rating system that often requires major renovations, existing building owners wanting to cut their carbon footprint according to the LEED system are forced into difficult financial decisions. In fact, only 85 U.S. landlords achieved the EB (Existing Building) rating among the 5 million commercial buildings in the country.

As of July 1, The U.S. Green Building Council will now allow commercial property owners to apply for certification under a revamped existing building program called LEED-EB Operations & Maintenance, or EBOM.

The new approach will solve many of the dilemmas green-oriented landlords faced when reaching for the coveted green badge, such as carry-over requirements from the New Construction (LEED-NC) rating system that were simply too difficult to obtain for completed, operational buildings. Additionally, property management teams already busy running daily operations are saddled with time-draining procedures and projects related to achieving the standard.

The EBOM program shifts the focus of the ratings points from physical design to operations and maintenance issues, such as energy and water usage. Landlord's can now focus on achieving points for operational upgrades, such as more efficient heating and cooling systems, stricter water use policies and green cleaning. Additionally, the new system will be better suited for implementation throughout a large portfolio of properties, such as office and industrial parks.

The USGBC is confident the new standards are not a fast track to certification for the estimated 60 billion square feet of commercial space in the marketplace but a program much better suited to overcoming the environmental restrictions of buildings constructed decades ago.

The Miller Richmond Company
Two Ravinia Drive, Suite 1590 • Atlanta, GA   30346
phone: 770-390-1891 • fax: 770-390-1899
drubenstein@millerrichmond.com  •  http://www.millerrichmond.com