Tag Archives: Tenant

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.

Our Most Important Measure

In a report issued today by Cushman & Wakefield the Firm suggest that improvement is continuing to occur in US employment trends.  Of significance: “Employment in the key office-using industries (Financial, Professional Business Services and Information) increased for the third time in the past four months, adding 23,000 jobs. Since October, the national economy has added 131,000 office using jobs.”

Given that office using employment is by far the most important driver of recovery in the commercial real estate markets, these stats are indeed a positive sign. We at The Commercial Tenant Resource believe that that we are solidly on the bottom of the employment curve looking up. Once recovery begins in earnest, then activity will pick up as well. Landlords will be quick to interpret increased activity and larger leases getting done as a sign that they can ease off concessions.

While different markets in the United States will turn around at varying speeds, it seems clear now that consumers are spending, manufacturers are manufacturing and corporate America is in the beginning stages of inviting more back into the workforce. As the report states: “The stabilization of the national labor market is the most positive economic development in two years….It means we are in the process of turning the corner.”

This is good news for the economy as a whole but it would appear that we are approaching the time of maximum opportunity for tenants in the real estate marketplace.

Ken Ashley

Signs of Sanity

Is there debt on this building?

Many in commercial real estate watched the massive bailouts of residential loans and other “strategic” US companies such as financial institutions and auto manufacturers with a sense of disbelief. Commercial real estate types have known for months that billions in debt in their industry are at risk as well. According to a Wall Street Journal report from October of last year banking regulators “are girding for a rerun of the housing-related losses now slamming thousands of banks that failed to set aside enough capital.”

Finally, last week a US Congressional Oversight Panel issued a 184 page report entitled Commercial Real Estate Losses and the Risk to Financial Stability.

It’s nice to know that Congress is at least paying attention.

Some insights from the report:

“A significant wave of commercial mortgage defaults would trigger economic damage that could touch the lives of every American.” Also, “…disproportionate exposure to commercial real estate capital creates negative feedback loops that suppresses economic recovery.”

Perhaps most interesting to tenants in commercial space, who, after all, are paying for the party here:

“Fewer loans to small business hamper employment growth, which could prolong commercial real estate problems by contributing to higher vacancy and lower cash flows.”

Couldn’t have said it better myself.

This report is in part the result of public hearing held in Atlanta in late January with many leaders from the commercial real estate community in attendance. According to the National Real Estate Investor, Atlanta has seen property values fall by 50% from their peak in 2007. In many ways, Atlanta is the poster child for commercial real estate woes nationwide. Partially as a result of Atlanta’s problems, bank failures have happened at a stunning rate in the State of Georgia with more on the horizon.

It is refreshing to know that Congress is finally paying attention to commercial real estate, and in fact the Congressional report on the subject is the first sign of sanity in the industry for sometime.

However, as we’ve written in this blog before the key to solving the “real estate problem” long term is true job growth. In most cases, business can’t grow without financing and it feels as if businesses are being unfairly penalized in the commercial real estate financing world. We feel like small business financing has gotten caught in the lint filter of the economy. Essentially credit needed to finance business growth appears to be hamstrung by regulators dealing with commercial real estate problems.

So, when you as a commercial real estate expert on the tenant side explain the “problem” in our area, you might remind others that growing prospering US businesses solve problems. Let’s help the public and elected officials understand the issues. Anything Congress or regulators can do to help businesses grow is better than yet another bail out.

Ken Ashley

On Valentine’s Day Tenants See Red!

The fact that the lease document is important is not new news. What is changing is what we have to focus on in the document. 

Now is clearly dangerous time to be a tenant. We still have to make sure that the document accurately reflects the business deal, but with landlords defaulting to their lenders, and with foreclosures rampant, we are beginning to see a whole host of legal issues spotlighted. If you are the person responsible for your company’s real estate leaseholds, you simply must get this right. Many millions of dollars are likely at stake, and missing some of these protections can be career limiting to say the least. 

As a general comment, it used to frustrate me to no end that landlords would create long leases with pages of tenant duties and obligations, but the landlord’s own duties or penalties for not performing were negligible. We always work hard for our clients to make the document more fair and balanced. Today, we have leverage as tenants but we must know the issues in order to protect our tenancy. You have a loaded gun, but you need to know where to shoot. 

At a recent CoreNet Global Summit, I participated in a panel along with Kitty Henry, a Partner and leasing expert of Munsch, Hardt, Kopf & Harr, P.C., and Trex Morris, who is the head of real estate in the Americas for Ernst & Young. The panel was very well received by a large audience consisting of global real estate leaders and senior service providers. The fact that they care about these issues means that we all need to be alert. 

Relationship "Map" Used in the Panel

 

I’m including two documents with the post: the first is Negotiating Leases During the Downturn: Creating Value and Avoiding Cost, which is the Powerpoint deck we used in the panel. The second is a wonderful supplemental piece authored by Kitty O’Henry, who is an outstanding commercial lease attorney. I have worked with Kitty on a deal where she represented the other side. She is very talented and next time I want her on our team! 

Many times lease concepts can be arcane and complex. In order to make the panel a little more fun and the lease points easier to understand, we came up with the format of a relationship between a couple and tied the lease points to different points of a relationship. We had to stretch on tying some of the lease issues to the relationship, but I bet you’ve never been to a lease class where folks laughed! They did in this one because relationships are funny many times without even trying. As far as I could tell, no one cried. 

I hope you find the attached helpful. Feel free to comment to this post with your own war stories. You can also reach out to me directly with issues or questions. 

And on this Valentine’s Day, I wish you the best for the human relationships in your life! 

Ken Ashley