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Commercial Real Estate Investment/Compensation for renegotiating commercial lease

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Expert: - 2/12/2009


Question
Hello, Mr. Avancena.

My name is Aliona. My question is the following.
The company I am working for has 5 commercial leases ongoing for use in
retail. We may be looking for a few more in the next few years.

We received an offer from a commercial real estate broker to get our 5
current leases re-negotiated and executed. I am wondering if you can
elaborate on this kind of brokers, and what are the most common ways and
amounts of compensation for these services.

Overall, what is the procedure for compensating a broker by a client, if the
broker finds the location for the commercial retail and helps negotiate the
new lease?

Thank you very much,
Aliona Mn.

Answer
Aliona-

I do not believe that there are any hard and fast rules on the brokerage situation that you describe.

You might consider having several brokers "bid" on the terms they would require - especially expenses - to provide their services.  Much will need to be discussed regarding how the appropriate fee will be finally determined.

I am very skeptical of EVER using a broker that you personally are not familiar with from past transactions together.  A bigger "name" firm is absolutely no guarantee that you will get quality services or that they will even act in your best interest.

I would request references of all brokers interested and interview the actual field agents that will be handling the transactions on a day to day basis.  It is very common for a large brokerage shop to send one of it best "suits" to interview for your business and then turn the actual brokerage work to one of their youthful or less experienced new agents so that the agency can keep the greatest amount of the commission for itself.

Be careful to ignore appearances, a small firm can do a fine job also.  You need to find the substance of what each broker offers.

Good Luck,

-Jim

Commercial Real Estate Investment

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Jim Avancena, CPM

Expertise

Best qualified to answer questions that involve commercial leases, that is, basic issues as well as the often unexpected effects of the complexities and inter-relationships of the provisions a lease may contain, explain how seemingly innocuous text in your lease can have a major impact on a Tenant or Landlord and their business operations, and the common practices utilized in the industry. I can untangle most matters that may come up from the time a tenant begins searching for a office or store space and the lease acquisition process, concerns related to remodeling/improving the leased premises, moving-in, subletting or assigning the leased space, and a long list of problems that may come up during the lease term and even after a tenant moves out. I have practical experience with most property management issues and resolving landlord and tenant disputes - especially those involving what may appear to be overcharges assessed for additional lease charges like CAM costs, operating expense reimbursement, real estate taxes, utilities, construction improvements etc. Note that I am not an attorney and cannot provide legal advice.

Experience

Thirty years active experience in the commercial real estate industry as a licensed real estate broker in the Washington DC Metro area (DC, Northern Virginia & Maryland). I have been admitted (approved) by the Maryland and DC courts to testify as an expert witness on the subjects of Commercial Leasing and Property Management in the area of standard industry practices. I have had a business for the last 14 years advising virtually every form of business entity from large national corporations to the smallest ma & pa new businesses regarding a wide range of commercial real estate matters in addition to property management and commercial leasing.

Organizations
Currently my three children keep me so busy that it is difficult to participate in organizations with continuing and specific time requirements.

Publications
I publish a local commercial real estate newsletter titled: "Tenants First". My firm was the subject of a high profile Washington Post business section cover page (2.25 full pages) feature story on January 13, 1993; titled "Overcharging Overhead".

Education/Credentials
BA in Political Science from Memphis University, and five years of study in the real estate development summer program at MIT. I was certified as a commercial property manager (CPM-IREM), and currently hold a brokers license in Maryland and the District of Columbia.

Awards and Honors
The same plaques and honors that most others in my industry have earned. I have none that I consider especially meaningful.

Past/Present Clients
Past clients include: The World Bank, George Washington University, National Association of Criminal Defense Attorneys, US Department of Commerce, The American Benefits Council, K-Mart Development, many law firms, a national union, other major organizations, and many, many small business firms and retail operators that I am most honored to serve. I estimate more than 1,500 firms/organizations.

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