Monthly Archives: February 2012

Automatic For The People

By Ken Ashley

(ATLANTA) February 29th, 2012

Early in the spring of 1991, I was in college, and I was hungry. The University of Georgia in Athens, Georgia is the home to a number of fine establishments catering to the college masses, of course, but I ventured off the beaten path

Five Stars!

towards the Pottery Town neighborhood for some good “Q.” I had heard about a great establishment with a unique feel. The restaurant, which is still there today, is known as Weaver D’s Delicious Fine Foods. It’s a down-home cafe at 1016 East Broad Street in Athens.

The restaurant occupies a 1950s commercial building with a false front parapet. The neighborhood around the building originally served as the mill village for the workers of a local pottery factory.

I walked down the long hill to get to the restaurant. What I didn’t know is that I’d get a lot more than a great meal that beautiful day. I got an unexpected life lesson from proprietor Dexter Weaver (AKA “Weaver D.”).

You see, Weaver has a large signboard outside of his cafe that reads “Delicious Fine Foods – Automatic for the People.” As I ordered my food from the now famous Weaver D, I asked him what “Automatic For The People” meant. He

And Now World Famous!

smiled a really big smile and crossed his arms thoughtfully. With a very serious, but friendly tone he said “Young man, that’s how I deliver my customer service. It’s fast and right; heck it’s just about automatic.”

“And it’s always for my customers,” he continued, “the people who spend their hard earned money for my food. I listen hard and we make them happy – quick.”

I thought a lot about Weaver’s seemingly simple comments. I was, and am impressed that a then small time purveyor of pork could think about his business in

The Wise Man Himself

this way. He’s not focused on his food, he’s focused on his customer and taking care of their needs as best he can.

His approach has made him world famous (thanks to REM, as described below). Weaver has spent his life in the service of others, but I think he’s making a fair

return. All these years later he has a book deal, and he’s become quite a celebrity in Athens, GA with his own Facebook Fan Page. Oh, and the food is terrific as well.

REM is Automatic for the People

It is this very same slogan that a little Athens act named REM chose for their 1992 album. The album went four times platinum (16 million copies sold worldwide)

One Of The Great Albums of the '90s

and was one of their most successful releases ever. It is still one of my favorites, and I am in fact listening to the music as I write this.

Automatic For Your People

Weaver D would have been a fine landlord. He understands the focus on customer through delivery of both a great product and service. Do your landlords across the portfolio have the same understanding?

Whether you are signing a lease for 5,000 feet for the sales office in Des Moines (nice town, by the way) or 1 million square feet for your jumbo new headquarters, how the asset will be managed is important. I have seen even tenured real estate executives forget to ask about property management. Many simply assume that landlords will take care of things. Besides, it’s in the lease, correct?

Weaver D would shake a finger at us for making that assumption. If you are performing the real estate function for your company, many are counting on you to deliver the right office space. Part of that equation is the service after the sale, also known as property management.

So what can you do to make the new pad Automatic For Your People?

1)           Determine who will be managing the property on a day-to-day basis. Taking them to lunch is usually a great investment of time.

2)           Is the manager on site or at another location? If they are at another building, how are day-to-day issues handled?

3)           What is the tenure on property of the manager? How many buildings do they handle?

4)           How many engineers are assigned? What is their experience and are they union or not?

5)           Is the management company in-house with building ownership or is the function outsourced to a third party provider? Both can be great resources, but it’s good to understand where the paycheck comes from.

6)           How does your user group interact with management? When problems occur how are they reported and managed? Most firms today will have a technology solution (webpages that feed engineers with smart phones), but ask lots of questions about how the process really works.

7)           Ask to see the capital improvement plan for the property. If you get a blank stare, beware.

8)           Does the interaction seem to be reactive (we’ll respond when the light bulb burns out) or proactive (let’s meet quarterly to make sure your needs are being met)?

9)           Ask if you can conduct tenant interviews with other major users in the building. You will learn a lot about the asset and have someone in your database if you have issues.

10)        Tour the physical plant. Can you “eat off the floor” or is it a mess? It should look as clean as a navy submarine, if you ask me.

11)        Inquire about “life safety.”  A manager must have a well documented and prepared emergency response plan for fire, storm, wind, etc.  Ask the manager to share his or her plan.  If no such plan exists, then this is a clear red flag.

12)        On the same subject, how does property management handle building security? What are the staffing levels? What technology does the property use? Have their been incidents, and if so, how is this information shared with tenants?

If you take the time to do some basic due diligence and note your findings to the file, you will have something to lean on when problems arise. Weaver D would be proud that you thought about your customers and went the extra mile. Automatic.

Thanks to “Automatic” Mike Mire, Regional Lead of Property Management at C&W, for his sage advice on this blog post.

Jack Be Nimble, Jack Be Quick

By Ken Ashley

February 9th, 2012 (ATLANTA)

Guess what? The sale in commercial real estate is coming to an end.

Commercial tenants have had the proverbial “life of Riley” for the past several years. Landlords would do almost anything to make the deal and tenants

Wish It Would Never End

certainly took advantage. Now, I represent tenants for a living, so making the best real estate deal possible never hurt my feelings. In fact, we take great satisfaction in making CFO’s smile at huge cost reductions and big TI packages.

However, part of our job is to do a “sanity check” and deliver a sober analysis of our ability to make a deal and at what price. Eliot Brown wrote a good piece in the Feb 6th Wall Street Journal entitled Less Building Now, Higher Office Rents Later. The premise is that the real estate industry has suffered a shut down of virtually all new construction in the United States. New construction starts were just 56 million square feet last year, reports the Journal, the lowest level since 1960.

With skittish banks, high vacancy and Wall Street worry still circling, significant new construction may be delayed further. The Journal: “…while the economy added 243,000 jobs in January, given the overall sluggish pace of recovery, it could still take a few years to fill the empty office space.”

Harken back to macroeconomics and you will recall that limiting supply along with constant or increasing demand changes the price. Costs will almost certainly rise; it’s just a question of when.

Blue Light Special on Aisle 12

Commercial real estate is different than buying socks at Kmart.  It’s not a commodity, and in fact, each transaction has tens of variables that can make true comparisons difficult to create. For example, location within one city or even one submarket can and does affect the net effective cost of real estate to tenants.

Aaaaatention Shoppers

Another variable involves the ability to expand or contract. For several years now, we have been able to confidently advise our clients to go long and option up. In other words, lock in these great economics for years to come, but also plan for future changes in the business with options to grow or contract. When buildings fill up, this is a harder trick to pull off.

Mr. Nimble Must Be Quick

We certainly don’t think the party is over for tenants, and let’s face it: there is still lots of vacancy in office buildings around the United States. But they don’t pay you the big bucks to not be prepared and aware of the market. We simply have to plan for the worst and hope for the best. In certain gateway cities like San

Better Move With A Purpose Here!

Francisco, LA and New York, the markets are already tightening up. Other cities will follow in 2012 if the current stream of heart warming economic news continues.

So what’s a poor CFO to do? May we suggest a few best practices that will help your transaction du jour succeed even in a recovering office market?

  • Before you kick the tires in the market, have a clear understanding of your real budget and the timing of your lease commencement. The margin for error diminishes as the pendulum swings the other way.
  • Speaking of timing, allow more, not less time to complete a transaction. In the next several years, as we get closer to “friction” between tenants, allowing time for a deal to die is important. Put another way, another tenant may have better credit and take “your” space and require you to move to another space or even another building. Frustrating, we know.
  • Look deep in that crystal ball and require your business people to make (and then be accountable for) future growth plans. If you can see growth in the range of 1-3% a year, then build that into your initial take and perhaps a must-take expansion later in your term.
  • Hyper growth has costs and landlords will bear only so much of keeping leasable space off the market.  If the business is going to grow by leaps and bounds then you can lease ahead of the curve, or plan to enter into a new lease a few years into your term. As they say, this is the cost of doing business.
  • Work to control and compress your internal decision-making time line. When the world collapsed in 2008, 2009 and 2010 we saw even simple decisions pushed to the highest levels of companies. Today, when the right deal presents itself, and it matches up to your clear understanding from the first bullet point above, strive to pull the trigger quickly.

Cycles keep things interesting don’t they? It began to be a little boring in the downturn to have landlords capitulate to your every demand. Now, as things pick up, this whole business of real estate will become a challenge. As the Boy Scouts say, Be Prepared. Keep focus, sprinkle in a little good fortune and together we’ll battle through the problem of optimistic landlords with great success.