Commercial Property Herald

Freedom of Speech Rights in California Shopping Centers

I have found much confusion by property managers relating to any requirement to allow picketers, protesters or the handing out of leaflets in shopping centers in California.  While both the United States and California Constitutions guarantee freedom of speech, that right is not an unlimited right nor does it necessarily give anyone access to or the right to picket, hand out fliers, circulating petitions, distributing pamphlets or protest in every and all shopping centers.

Current California law focuses on the size of the shopping center and where the center may "functionally step into the shoes of a municipality or exercise municipal functions of power."  The US Supreme Court in upholding a California Supreme court decision, held that large shopping centers have essentially replaced public spaces that have traditionally been used for the purpose of public protest.

The cases however, do not draw a fine line and complete guidance on what centers are considered large and which ones are not.  This determination must be made on a case by case basis and in consideration of all factors.  Furthermore, even if those instances in which a shopping center is considered large enough to protect freedom of speech rights, the centers are allowed to enforce reasonable restrictions, particular when the expressive activity is unrelated to the commercial purpose of the center.  Finally, it should be noted that this posting relates only to shopping centers located in California.

Special recognition is given to Sean W. Southard and Kecia R. Felton for their article, "Private shopping Malls - The "Not-So-Private" Private Property," published in the California Real Property Journal.

 

More Updates From Around the Nation on Taxing Internet Sales and Brick & Mortar Sales Tax Moratorium

The following updates have been brought to my attention by the ICSC Global Public Policy Newsletter.

Amazon, which obviously opposes any kind of tax on internet sales, as it should for its own interests, has announced that it will open a new warehouse in Delaware, as opposed to New Jersey, purportedly in response despite a well-publicized effort in New Jersey to attract a distribution center for Amazon.com Inc.. As reported by ICSC, in January, State Senator Raymond Lesniak co-sponsored a bill that would require online companies like Amazon to collect sales taxes in New Jersey if they maintain a distribution center, office or other corporate physical presence in the state. It should come as no surprise that such a bill would discourage internet warehouses and distribution centers in New Jersey. This bill was introduced in an effort to level the playing field between Internet sellers and the state's brick-and-mortar stores after it was discovered that Amazon is seeking a 22-month sales tax holiday before investing $65 million to build a fulfillment center in the state.

This issue bears repeating.  New Jersey, like most other states, does impose a tax, often referred to as a Use Tax, which imposes the reporting and the payment of the tax on the consumer. The tax is very similar to a sales tax collected by the brick & mortar stores.  The difference is that the sales tax is enforced against the retailer and in the case of the use tax, it is enforced against the consumer.  As a practical matter, a use tax is usually very difficult to enforce unless the item purchased is a type that requires registration in the state, such as an automobile.

Taxing internet sales in the form of a sales tax as compared to a use tax, would give states greater enforceability, presumably allowing each state to enforce its own tax on sales shipped to residents within its jurisdictional border and enforcing the tax on the internet seller, wherever the seller is located.

As further reported by ICSC, the new bill drew attention to the New Jersey's sales tax policies and propelled the fairness issue higher in the conscious of the public and legislators.  As I have stated previously, I think that it is a mistake to promote internet sales tax on the basis of "fairness." Proponents of an internet sales tax need to convince the public and their legislators that the public will benefit much more from such a tax than a state would from the increased employment resulting from a warehouse within the state.  Without a significant overriding benefit to the state and state residents, taxing the internet will not be a popular action.  I suspect that most people would prefer the advantage of buying online and effectively avoiding any sales tax that they would have been obligated to pay if the bought at a local brick & mortar.

Somewhat related to my suggestion of a sales tax moratorium on brick & mortar sales in conjunction with requiring taxation of internet sales, several states are introducing bills in state legislatures for sales tax holidays.

• The Colorado House Finance Committee ,released the "back-to-school" sales tax holiday bill.  This bill would create a sales and use tax holiday for "back-to-school" items for three days in the beginning of August for a period of five years beginning in 2012. 
• In Florida, a school supply sales tax holiday bill, was passed by the full House which would create a sales and use tax holiday for the sale of clothing, wallets, and bags under $75 and school supplies under $15. 
• In Virginia, a sales tax holiday bill for hurricane preparedness equipment and energy efficient products, was reported out of the Senate Finance Committee unanimously. 

In my opinion, these sales tax moratoriums don't go far enough and should be conditioned upon the brick & mortar retailers hiring more employees.  To get fairness, you've got to contribute something and increased employment will be the key to success.

How Should Video be Used by Commercial Real Estate Professionals?

I know it sounds like I am gushing and I suppose that I am a bit, but Duke Long as come a long, long way in a short time with his video series, "The Real State of Real Estate."

His newer videos evidence a focus on using the visual medium of video to enhance his message. Furthermore, he seems to have thought out what he wants to accomplish and what message he intends to convey through each of his videos.

For example, The key message that I got from Duke's, "Bricks & Slaughter" video was that shopping center owners better start consider the growing effect of online sales as part of their overall strategy for their centers.  While verbally expressing himself on the video, the visual presentation of the empty parking lot and the locked and apparantly abandoned store fronts, said as much, if not more than his verbal comments.  Not only that, the video had significant emotional impact, maintaining the audiences attention.

Duke's, "Wabash Landing" is another example of a thoughtfull mix of the conjunction of visual messaging and audio content. The message that is conveyed to me in this video is that if you are an owner of a shopping center, it might be worth your time to give Duke a call to get some help.  This video enhances Duke's personal brand.  More videos like this one may serve to increase business for his day job, which is being a broker.

My third example of a Duke Long video is his, "Super Bowl Central. Georgia Street". Duke isn't even in this video which is fortunatly, hosted on screen by Leslie Bonacker of Cresa Partners. The clear reason for this video was to promote a.k.a. market the "newly redeveloped Georgia Street".  It seems to me that its purpose is to get people to lease space on Georgia street. To be frank, I am not as enamored with this video as I am with the prior two.  The audio script wouldn't motivate me to lease space nor is the visual component of the video, showing an empty lobby and two people walking down the street compelling.  While I have no problem with Leslie giving some background and describing what is going to be happening on the street during the Super Bowl festivities, it seems that the purpose of the video would have been better served by adding some drawings or video of what one would expect to see during the Super Bowl.  My gosh, its the Super Bowl.  The street should be mobbed and the visual element should  convey that message. Now if I were a retailer, I would want to lease space as fast as I could if I believed that street would be as crowded as I expected.  In this case, I believe the video detracted from the message rather than enhance it.

How Will Brick & Mortar Retail Survive Online Sales - Part One

This is the first in a series of posts about “online” vs. “brick & mortar” retail sales and what I consider the factors affecting both.  It is my intention by this series of articles to facilitate thought, discussion and analysis in the hope of proposing helpful strategies to allow a healthy co-existence between the two methods of retail sales.  As General Martin Dempsey said today on Face The Nation, brick & mortar is at a “strategic deflection point,” in which it needs to learn and adapt. The bottom line is that I do not see online sales going away anytime soon and if you deal in the brick & mortar, you better think out your strategy.

During the last week of December, I read an article declaring that 13% of all online sales on Christmas day was for the purchase of an iPhone, iPad or iPod.  Steve Jobs is likely smiling away in his grave. A few days later I read another article about how much online holiday sales have increased, (I don’t recall the number but it was in the billions).  These two facts have been festering in my mind for the last two weeks. What is the current economic realities of brick & mortar retail and how will brick & mortar survive the internet.

Not to overstate the obvious, there is a strong trend towards online purchasing and away from brick & mortar. I don’t think anyone sees this trend abating anytime soon. I’ve noticed this trend in my own buying habits and the buying habits of those around me.  This year I have made online purchases of clothing; the type of purchases I would have never done, previously. 

For example, this year I stocked up on two new business suits, a few casual slacks and shirts and a few new pair of shoes, all of which were purchased online.  To be fair, I didn’t even consider the suits until after I had seen them in a brick & mortar store and I first saw the shoes in a print catalogue. I’ll let you in on a well known secret; I have a thing for men’s saddle and spectator shoes.  A style not widely popular and a style that has been pretty difficult to get unless you wanted to play golf in them and were willing to walk around your home and office with spikes on. So I was pretty interested in getting a few new pair.

Sometime in September, I received a print catalogue, showing saddle shoes, manufactured by Cole Hahn, in larger sizes.  While I liked what I saw, I was reluctant to purchase shoes online, sight unseen. Later, in October, my wife and I stopped by a Cole Hahn, brick & mortar, store in a mall in Phoenix.  To the delight of my wife, there on display were the saddle shoes. At the urging of my wife, I tried several pair on. Although I would have liked to wear the shoes out of the store, the store did not have my size in stock and I had to order them, to b delivered to my home.  The shoes arrived a week or so later. At the time that I ordered the shoes in the store, they seemed a bit narrow. However, since Cole Hahn made it brain dead easy to return, I felt comfortable ordering them.

After the shoes arrived, it was very clear that they were too narrow so I returned them and received a full credit. Although disappointed, I remembered that the same shoes were being offered by a major big man, brick & mortar retailer with a large, (no pun intended) online marketing presence. There, on their website, were the same shoes but in wider sizes. Not only that, some of the shoes were being heavily discounted. Without further ado, sitting at my desk, I ordered a few pair.  Within a week, I had shoes that fit and it cost me less money. I saved money by having the shoes shipped to their local store. 

Offering free shipping to their brick & mortar store was a brilliant piece of marketing on their part.  The store wasn’t that far away so it was easy for me to pick up my shoes and when I was in the store, I bought three shirts, two pair of slacks and tried on two, three piece suits.

A few weeks later, I received an email newsletter indicating that the suits were being offered at a 30% discount, if purchased online by the end of November. Since I liked the suits and knew what size to order, I purchased them online, saved 30% and had them shipped to the store again, saving the shipping charge.  You know where I am going with this. When I went to the store to pick up my suits, I also bought two more dress shirts and two ties, spending more money.  What a surprise.  Brilliant, sheer brilliance.  There is no doubt in my mind that somebody with brains really thought through their strategy, coordinating their online and brick & mortar marketing. I love it when people use their head.

So what is the point of my “shoe & suit” story?

Trust.  I am gaining a greater trust of online purchasing; and

Thoughtful marketing and the effective coordination of online stores with their corresponding brick & mortar stores.  How to have both work in tandem and help each other out rather than cannibalizing the sales of the other.

More on these topics and the effect of online taxation on brick & mortar sales in later posts.  You can leave comments in to this post on Commercial Property Herald below or comment on twitter @creradio.

 

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?

Howard Kline and Joel Hall Discuss and Analyze more commercial lease clauses

On September 28, 2011, Joel Hall joins me on CRE Radio for a little “point/counterpoint” discussion with host, Howard Kline as they delve into the relative positions of the landlord and tenant on specific lease clauses that may include, time permitting:

• Exclusives & Exclusive Waiver Agreements
• SNDA’s
• Surrender/Holdover
• Force Majeur

Click on the CRE Radio link above that is underlined to be taken to the CRE Radio site to listen to the show live.

We are not going do a light brush-over of each of these common provisions but we plan on having an in depth analysis, from both the landlord and tenant perspectives. We want the listeners to walk away from this show with a clear understanding of what these provisions do and don’t do as well as their, often, not too apparent significance.

Joel, a former real estate counsel for the Gap and often transactional counsel handling The Apple Stores, will take a, decidedly, pro tenant position while Howard will represent the perspective of the landlord.  Hopefully they will avoid calling each other names during the show, but you never know.

This show is the 3rd in a series of radio shows presented by CRE Radio and Howard Kline in which Howard and his guests give detailed analyses of  specific commercial lease clauses.  Hopefully, you will learn and be entertained while Howard and Joel duke it out.

After the show airs live, you can listen to the podcast by clicking on CRE Radio and listen to the show online or download the MP3 or iTunes.

Waiver of Jury Trial in a Commercial Lease

Every commercial landlord wants a waiver of jury trial provision in their lease and nearly every commercial lease in California contains such a provision.  Why do landlord's feel that this provision is so important?

The answer is relatively simple.  Most jurors have been tenants albeit, residential tenants at some point in their lives and few have been in the position of a landlord.  Far more jurors will be able to relate to and sympathize with the tenant's position.  Obviously, the landlords fear that a jury will stray from the strict dictates of the law and come to a verdict based more on emotion than the law. As a landlord attorney, I almost never want to be in front of a jury and will do what ever I can to avoid the situation.  On the other hand, when representing a tenant, I almost always want, or at the very least threaten to have the matter heard in front of  a jury.

The real question posed to me by Joel Hall in a Linkedin discussion is; "to what extent is the Waiver of Jury Trial provision often seen in leases, enforceable."

As a California attorney, I can answer that question as to California leases; NO!  A commercial tenant can waive its right to a jury trial, but not until the filing of a suit by one of the parties to the lease.  It is my understanding that the California courts will not enforce the Waiver of a Jury Trial provision in a commercial lease, based upon constitutional grounds.

So if a jury trial is so potentially dangerous to a landlord, what, if anything can a landlord put in a lease to avoid a jury trial?  That is a subject of another blog post and an article I wrote nearly 15 years and which was published in the National Law Journal and as part of the ICSC Annual Legal Review.  Now if I can only find that article.

By the way, although not an expert in residential leasing, I assume that a jury trial cannot be waived in a residential lease either.

What Congress can learn from real estate professionals

Last Wednesday we aired our radio show on the topic of CAM Charges & Building Operating Expenses.  It was an "open forum" born from a discussion topic that I started on LinkedIn.  The "open forum" concept for the radio show was a new format that I wanted to try out and in essence was and open invitation to anyone who wanted to participate in the conversation.  We had 7 highly knowledgeable, intelligent and articulate featured guests and a number of equally intelligent listeners called in to participate.

The point of this post is not to discuss the substance of the radio discussion and CAM charges, but to focus on the interaction between everyone who participated in the show, despite some clear and vigorous disagreement.

So far, every comment about the show from guests and listeners focused on how great the open forum format was, in great part as a result of the courtesy, maturity and intelligence of all who participated in the discussion.  Some vociferously disagreed with statements made by others, but there was no apparent animosity and very little if any "stepping on toes," or shouting over others.  As a matter of fact, at times during the show, when two people started talking at the same time, they both stopped and there was a moment of silence while each stopped talking to allow the other to speak.  Imagine that?  Imagine that kind of courtesy in Congress.

I might add that every comment included the word, "fun".  How much fun is it to participate in a conversation with other people who are every bit as smart and experienced as you, if not more and can disagree without attacking each other personally.  I dare say that each one of us walked away from  the show a little bit smarter and knowledgeable than when we started the show.

So what does all of this have to do with congress?  Well, from my perspective, Congress and the electorate would benefit from respectfull and intelligent discourse on very complicated social and economic issues without visciouis attacks on others and without blamming each other for everything that has gone wrong in our lifetime.  It seems that our energy would be much better spent trying to solve problems with a healthy repect for the opinions, attitudes and paradigms of others even though they might disagree.  I think that you would better understand what I am saying if you listened to the radio show.  Click the above link or go to www.creradio.com.

Cooperation between Broker & Attorney when Negotiating Commercial Leases

I have been participating in an ongoing discussion having to do with fixed fee billings as part of the Corporate Real Estate Group of Linkedin.  I thought I would share in this post a portion of that discussion relating to cooperation between the client, attorney and broker when negotiating a commercial lease.

via ocrealestate.blogs.com

Tics another seemingly good idea gone south

Jonathan Lanser & Jeff Collins report in the Orange County Register that Daymark Realty Advisors, a subsidiary of Grubb & Ellis, has been sold to a joint venture controlled by Sovereign Capital Management Group of San Diego and New York-based Infinity Urban Century, an investment affiliate of The Infinity Group.

I can remember getting a call from Aaron Weiner sometime between 2001 and 2005 asking me if I knew much about Tics, Tenant-in-Common investmenets,  Although I obviously knew what a tenant-in-common was, I didn't know much of the term as it was used as an investment vehicle rather than simply a way of holding title to property.

I immediatly began doing some research on the matter and discovered what seemed to be an incredibly smart way to get smaller investors into real estate and serve as an incredibly useful vehicle to develop business for real estate developers and brokers.  Instead of selling real estate, you sell shares.  Sounded like a security to me so I stayed out of it. Thank goodness I did.

I have this conservative, fatallist attitude that is, if I have heard of it, it is already to late to invest in it.  So it turns out that TICs turned out to be a bad idea, whcih flaws were not exposed until the real estate market starting going bad, catching a lot of small, mom & pop investors in the crash and ruining their retirement.  I don't think that, for the most part, there was anything malicious or conniving about it, just a good idea that didn't turn out as well as everyone hoped.

So what is the next big investment vehicle on the horizon?