Commercial Property Herald

Commercial Real Estate War Story Ideas & Kindle Fire Giveaway to the Most Interesting Story

On January 11, 2012, CRE Radio will host our annual "Best Of Commercial Real Estate War Stories, 2011",  at 12 noon Pacific Standard Time.  This is going to be a special show in which listeners get to re-live some of their most interesting commercial real estate stories. 

The stories can be about "interesting" "funny" or "stupid" deals.  Terrible or great buyers, sellers or landlords. Miracles or so they seemed, like Tim Tebow.  Great accomplishments.  Something that you are proud or ashamed of.  Any anecdotal story that you think would be of significant interest to our commercial real estate listeners.  We are not interested though, in hurtful or cruel stories.

To top off the show, we are going to give away a brand, spanking new Kindle Fire, a combination of color e-reader and Android tablet to the person who provides the best story.

Since the radio show will be no longer than 1 1/2 hours, we have limited time to air stories so we request that you send to me a brief written synopsis of your story along with your contact information and we will choose the top 10 stories to be included on the show.  If your story is chosen, we will either have you tell the story, live on the radio or pre-record it for airing during the show.  Only listeners registered at our website, www.creradio.com will be eligible to receive the Kindle Fire.

So have I told you the story about the time, 36 years ago when I took a retainer check from a client who had been arrested for writing bad checks?  Do I need to say more.

Send your story to me by leaving a comment on this blog or by writing to me at:

Twitter:  @creradio

LinkedIn: http://www.linkedin.com/in/howardkline

email: howard@creradio.com

 

Are Insurers Going to Take the Lead on Commercial Real Estate Lending?

The Wall Street Journal writes that in Europe, insurers are influencing terms and making credit both easier and cheaper.

I can recall in the 90's do a great deal of post-foreclosure work for some of the larger insurance companies that had made numerous commercial loans earlier in the decade and in the 80's.  If my recollection serves me correctly, at this time, before the CMBS market, insurance companies were a very significant source of finance for the commercial real estate market. 

Is it possible that insurers are coming back to the market and to how influential will they be?

Starbuck's General Counsel Retires to Join Obama Campaign

Ok, I really couldn't help myself on this one.  Consider it a lack of self control, I suppose.  

I just read that the Starbuck's General Counsel is retiring to join the Obama for President 2012 campaign.  While the article doesn't mention this, I am absolutely certain that Obama has asked Paula Boggs to join the campaign due to her expertise dealing with "Tea Parties." :)

So you ask, what does this have to do with commercial real estate?  Grounds, of course.

Alright, maybe I ought to keep my day job.  I am obviously not a stand up comedian, I am sitting down!

Ground Lease Payments as a CAM Expense

I feel a little bit like I am lurking in my LinkedIn groups for topics of interest to write about.  Sorry if it seems so, but there are some good questions and ideas that come out of the groups that I like to comment on, both in the groups and on my blawg, in more detail.

Steve Hupman, CPM, started a discussion on: 

"Ground Lease payments as a CAM expense in a Class A office building."

I chimed in by stating:

"Seems to me that a ground lease payment is just another way to finance an interest in the real property.  From a technical perspective, it is not a "fee" interest but an interest, nevertheless.  From an historical perspective, and I am just speaking from anecdotal experience, owners don't include their financing costs in operating expenses, since they are generally not considered an expense of operating the property.  They would be considered an expense of ownership.  With that being said, I really have no problem with an owner trying to get a pure NNN return on their property so long as it is clear that all of the landlord's expenses of owning, managing and operating the property are to be included in the definition of operating expenses and the broader definition of "building expenses" or additional rent.  For my part, as a tenant, I would strongly resist any attempt by the landlord to include their cost of ownership."

Changed Conditions Clauses in Commercial Leases - Peter Morris

Peter Morris just sent to me a blog post, Advanced Lease Negotiations: Changed Conditions Clause, that he posted in his blog, Advance Beyond The Building.  In this post, he talks about inserting a clause that would allow or perhaps require the parties to the lease to change the terms depending upon the occurrence of pre-defined conditions, including but not limited to:

• Renovation or rehab
• Expansion of the property
• Addition of a major or anchor tenant
• A significant increase in the average sales of the property, indicating a stronger property
• Attainment of LEED or other sustainable certification (this is particularly useful in office buildings)
• Addition of infrastructure positively affecting the property, such as a major transit stop or road realignment
• Or a combination of any or all of these.

It is common for landlord's and tenants to try to hedge their bets by putting in some provisions that allow for changes to the terms based upon a change in circumstances, such as a CPI increase or option language, I have seen all kinds of language that is relatively easy to define as to CPI increases and options.

Now to be truthful, I consider Peter to be one of the more intelligent and articulate real estate professionals that I know.  However, the thought of having to try to define these pre-defined circumstances gives me the "willies". You are just asking for trouble here.  I am confident that no matter how hard you try to define your language, you are likely going to run into trouble and disagreement. 

 

Disclosure for Commission Rebate to Tenant

Wow, shame on me for not writing a post for over 1 1/2 months.  I really got very busy with legal work, representing clients and attending conferences, etc.  Shame on me and hopefully, this shameless dereliction of my duties wont happen in 2012.  I have stored up a lot of comments on issues relevant to Commercial Real Estate and have had some very interesting conversations on CRE Radio over the last month and a half.  More on that in a separate post.

I need to give credit to this post to Dan Smolensky of the Modal Group out of Chicago who started the discussion 6 months ago and asked the question:

"Lease Commission Rebate to Client.  Is anyone giving clients part of their lease commissions?"

There were many comments to the question including people who questioned and condemned the practice on a totally ethical basis or some that felt that the practice was fine so long as some disclosure was made and that it was ok to make disclosure later, rather than sooner.  From my perspective, depending upon the requirements of state or local law and your local broker rules, rebating part of your commission back to the tenant, should be fine, so long as full disclosure is made to all parties and I mean at the very least, the owner or landlord who is paying the commission and the listing broker.  

I also think that disclosure should be made, in writing, sonner, rather than later.  I am not sure that sooner means before execution of the LOI, but I would feel most comfortable, no later than at the time of execution of the LOI and certainly, not as late as execution of the lease.  Please keep in mind that disclosure is the key here and they type of disclosure intended to fully inform all of the appropriate parties of the substance of the transaction.  Simply inserting words into the LOI, simply for the purpose of avoiding potential liability is less important then the actual and clear communication of the intent to do so.