Monday, December 3, 2012

Why do I need a Technology Specialized Broker?

Have you ever tried to find a Commercial Real Estate agent that understands the specialized needs of technology companies? Do you know what these needs are?

In my prior life of selling technology products and services, I encountered technology-reliant organizations who hadn't considered technology ramifications when selecting space to lease or purchase. The impact was often substantial... Have you ever seen a broadcaster go down because a carrier's (old) fiber developed microbreaks? Or have you ever seen a technology company whose offices are across town from most of their collaborative partners? How about an online gaming company who finds out 45 days before move-in that their new facility is not fed by any communications fiber? I have seen all of these... and more.

Each of these situations could have been avoided IF the organizations had worked with a real estate broker who understood the key technology factors affecting real estate. The problem is that such agents are not common.

For the record, the biggest of the key technology factors are communications, power, and people. Contrary to common perception, communications fiber does NOT reach all buildings (much less all areas) in a city, robust / diverse power CAN be had if one knows how to look for it, and geographic knowledge corridors DO evolve.

So which companies should seek a technology-savvy broker? To keep it simple, don't look at the name of the organization - just ask a few key questions. Organizations who answer "yes" to more than one of the questions below should seek a broker who understands technology:
- Do phone, data, or power outages impact your profits?
- Do you require large information “pipes” to move data to other facilities?
- Do you rely upon technical people to develop or manufacture products?
- Is the movement of data time-sensitive?  In other words, if you have to wait until later to do it, are there financial ramifications?

You may be thinking, "I don't really need technology-savvy broker because I have consultants who look at those factors." I'll share three thoughts on that point. First, you'll have a much smoother experience if your broker speaks your consultants' language and can work with them in evaluating these specialized factors. Second, your consultants are charging you for their time, while your real estate broker should cost you nothing out of pocket (the landlord typically pays his/her fees). You do the math. Finally, your real estate broker's job is to know the area and to find you the right building... wouldn't it be better if they can attack that task by partnering with your consultant rather than having to lean on them?

And what is the reward for taking the extra time to find a tech-savvy broker? It's simple - peace of mind.  You can rest in the knowledge that your new space won't come with any ugly surprises.  No unavailable fiber, no regular power outages, and no cross-town drives to get to organizations that should be nearby.

If you don't know of such an agent, feel free to call.  I'll help you determine if you really need one and, if you do, tell you who I may know in your area.

Here's to your success!
John
404.547.2009

Wednesday, September 5, 2012

Why do I need a Healthcare-Specialized Broker?

When a healthcare provider recognizes that it's time to evaluate real estate options, how should they go about selecting a real estate agent ? It’s a great question… one that a doctor or practice manager somewhere asks every day. It’s also a vitally important question, as results impact cost, revenue, compliance, and even capitalization strategies for years to come. A knowledgeable medical real estate agent can bring clarity to the “buy versus lease” decision, insure that all viable options are considered, secure the best possible pricing, garner the best possible contractual terms, and protect all parties from hidden regulatory pitfalls.

Flawed Strategies
There are definite criteria a healthcare provider should consider when selecting an agent to represent them. Let’s begin with how NOT to proceed. The most prevalent of the flawed agent selection strategies are (1) not using an agent at all, (2) calling the agent on a listing sign and allowing that agent to handle both sides of transaction, and (3) working with a non-specialized agent. While these strategies seem reasonable on the surface, there’s a glaring problem with each:

Flawed Strategy 1: Not using an agent. Because practitioners know who their peers are, they also tend to know of at least one available space that could work for them. Or if they don’t, it only takes a call or two to find something. Unfortunately, this approach fails to consider all possibilities so that the best option can be pursued AND so that competing options can be leveraged to gain the best pricing and terms. This mistake is becomes a frequent precursor to the effects of mistake #2, when the doctor who owns the property of interest introduces the tenant/buyer to his listing agent to “set it all up.”

Flawed Strategy 2: Relying on the listing agent. Good listing agents are a pleasure to work with, and they’re happy to handle both sides of a transaction for an unrepresented tenant/buyer. They will provide market data, help plan the space, provide legal documents, and even work to accommodate pricing and term change requests. But they are not neutral… they are contractually committed to protect the owner’s interests. They do not point out things that the tenant/buyer overlooks, they do not point out better alternatives for the tenant/buyer, and they insure that gray areas swing in favor of the landlord. That is their job as the listing agent.

Flawed Strategy 3: Working with a general agent. Medical transactions have many atypical elements. First and foremost, healthcare market and industry trend knowledge are critical. Hospital affiliations, competitor activities, geographical market shifts, compliance law changes and even owner personalities (quirks?) impact outcomes. What’s more, construction budgets are very different and tenant/buyers must pay attention to a unique set of factors (a few include hours of operation, parking ratios, competition, guarantees, partner death/debilitation, and signage). It’s simply not possible for a general agent to stay current on these matters without constant unwavering focus.

One other note on how not to proceed: When practitioners don’t use an agent, it’s often because they believe they’re removing cost from the transaction, resulting in better pricing. In a direct lease, with no agents involved, this may be true – no agent fees apply, but legal fees will almost certainly be higher and the tenant/buyer fails to consider ALL market options. However, once a listing agent is involved, the owner is contractually obligated to pay a fee… the only question is whether that fee goes solely to the owner’s representative or is shared between the owner’s representative and the tenant/buyer’s representative. Money is not saved, and only one party’s interests are protected.

Factors to Look For
So what should a practitioner look for when choosing a commercial real estate agent? We in the Global Healthcare Services group have identified four key factors…

Factor 1: Experience – Recent, Relevant, and Lots of it. The only way to truly stay current on the healthcare real estate marketplace is to be an active participant. There are so many factors working in any given submarket that one must be an active participant to have the best information. Hospital strategies, practices moving into and out of markets, physician alignments, and demographic shifts are but a few of the changing factors that can make the difference between a good decision and a bad one. Similarly, contract content is constantly evolving. Something that would not have been accepted 6 months ago may be acceptable today if one is aware of industry trends and precedents. It’s important to note that the knowledge gleaned from such experience comes best through a team environment, where several agents work together and the number of transactions is great enough to insure a broader look than any solo agent could provide.

Factor 2: Financial Savvy – to minimize the guesswork. Real estate decisions always involve some degree of subjective evaluation (aka predictive analytics), but there are many factors that can be reviewed objectively as well. The more objective criteria that an agent can quantify for comparison, the less subjective guesswork is required. And less subjectivity means less uncertainty. A few examples of the metrics an effective healthcare real estate agent can provide include:

  • Net Present Value of competing lease options (including factors such as relocation, construction, utilities, etc.) simmered to $-per-SF or averaged annually.
  • Net Present Value of competing lease/purchase options including construction, appreciation, lease-up and even exit strategies.
  • Internal Rate of Return analyses
  • Cash on Cash Returns

Factor 3: Industry Connections – for Predictions and Execution. The are two key reasons that industry connections are critical for success in high-quality medical real estate agency. One is accurate predictive information and the other is project execution.

  • Predictive Information. If recent years have proven nothing else, they have proven that the business side of healthcare is not static. Legislation, reimbursements, mergers and acquisitions, accounting practices, etcetera require constant attention to insure that the decision made today aligns with the direction the industry is poised to take tomorrow. Similarly, factors as simple as construction costs shift with economic conditions. Solid decisions require current information, and the best way to remain current is via an ongoing dialog with professionals working in that particular sector.
  • Project Execution. Whether one needs regulatory approval for a Surgery Center, the best contractor(s) for a particular project, or the CPA firm with the most relevant knowledge, it’s important that the medical agent be able to quickly facilitate introductions to the right resources at the right time.

Factor 4: Service Breadth – provides Insight and Continuity.

  • Insight. The commercial real estate is a fragmented industry… an agent that helps tenants and buyers has a very different focus, job description, and mindset than one that primarily lists property for lease. And those who work with investors operate in another world all together. Ironically, however, the best results in any ONE sector come through a solid understanding of the activities, trends, and mindsets in ALL sectors. To be a good tenant rep, for example, it helps greatly to understand how an owner’s asset manager evaluates a leasing proposal. Members of an integrated team have direct access to such healthcare-specific cross-sector information on a real-time basis.
  • Continuity. Medical organizations frequently touch many areas of the real estate services continuum. A hospital or large practice may be a tenant, landlord, buyer, seller and even investor. Without service breadth, the healthcare provider is guaranteed that they will eventually either have to compromise on outcome quality by bringing their agent outside of that agent’s specialty or develop multiple relationships. With an integrated team, the provider is able to gain best of breed capabilities without creating and managing multiple relationships.

In conclusion
The selection of a healthcare real estate agent is vitally important to a medical organization’s bottom line goals. Today’s climate is simply too volatile to leave minimizing costs, maximizing revenues, remaining compliant, and accessing capital to chance. An effective agent will add clarity to decisions and oversee their execution, ultimately allowing the healthcare provider to move ahead effectively while not losing focus on their first priority – the patient.

Wednesday, April 25, 2012

What does BGC's acquisition of Grubb mean?

What does the Grubb acquisition mean?
A common question I'm hearing at the moment is, “What does BGC Partners’ acquisition of Grubb & Ellis mean to end users?” It’s a great question, and I'm excited to have great answers – particularly this early in the merger process. The key impacts to clients will come in the areas of tools, presence, service offerings, and financial resources.

Change 1: The Name
The most immediate change is the name. Call a Grubb & Ellis office and you’ll now be greeted with the name “Newmark Grubb Knight Frank.” The Newmark Knight Frank part of the name comes from the other real estate brokerage firm BGC has acquired in the past year. Bringing these two very different firms together allows BGC to take the best ideas, people and practices from both firms, merge them with BGC’s own expertise, and create a completely new firm with completely fresh perspectives.

Change 2: Tools
As a financial services organization, BGC Partners has a rich history of data analysis leading to actionable findings. Similarly, Newmark Knight Frank’s Corporate Services division has invested heavily to create unusually powerful real estate analysis tools. These intelligent approaches to business have already begun to impact the the new Newmark Grubb Knight Frank (NGKF) organization. An example is the NGKF real estate management platform, an extremely sophisticated client platform allowing real-time access to amazing amounts of data and (most impressively) allowing decision-makers to quickly run “what if” scenarios to determine how best to achieve their objectives. Budget reviews, portfolio analyses, client/owner footprint pairings, space utilization scenarios, square feet by product, Class A versus Class B profitability analysis… it’s all possible on a real-time basis.

Change 3: Presence
Grubb & Ellis was primarily a domestic firm with roughly 100 offices. BGC’s acquisition of Newmark Knight Frank gave them a real estate presence in 300 offices spread across 5 continents and a workforce of more than 8,000. The new domestic Newmark Grubb Knight Frank (NGKF) presence appears in the map below.
The Newmark Grubb Knight Frank domestic presence


Change 4: Service Offerings
In addition to technology-based tools such as the previously-mentioned real estate management platform, the combined NGKF organization offers consulting in the areas of operations, portfolio strategies, workplace strategies, business processes, location optimization, and account management in areas such as transaction management, global program management, governance program development, and facilities management. Capitalization will be another particularly strong area due to to BGC Partners’ close ties to investment bank Cantor Fitzgerald (see the following paragraph). Alone, Grubb & Ellis and Newmark Knight Frank offered many of these services within their respective footprints and areas of strength. Together with BGC, they bring best-of-breed solutions to all parts of the globe.

Change 5: Financial Depth
BGC Partners is a publicly-traded company led by Chairman and CEO Howard Lutnick. Lutnick is also the Chairman and CEO of privately-held Cantor Fitzgerald (www.Cantor.com), a prominent and highly successful investment bank and brokerage firm. BGC Partners’ 2011 revenues of $1.44B include only 3 months of Newmark Knight Frank results. With the Grubb & Ellis addition, one can only expect BGC Partners’ revenues to climb. To clients, this strength should give confidence that BGC Partners’ real estate companies have the financial depth and diversification to address any storms that the economy may bring.

In Conclusion
Grubb & Ellis, Newmark Knight Frank, and BGC Partners all have strong and well-respected histories in their respective areas of expertise. Bringing them together in a single real estate platform creates a one-stop solution to address healthcare organizations’ comprehensive needs, and the I am proud to be a part of it all. To better understand what it could mean to your organization, feel free to call or email me.

Wednesday, March 14, 2012

New Areas Eligible for Tax Incentives

Atlanta's 2012 Less Developed Census Tract (LDCT) areas are out, and they include a number of areas not previously eligible. What this means to business (and property) owners is that the occupants of certain properties can gain a tax credit as high as $3,500 per new job if a number of criteria are met.
  • Property Owners: You'll want to include this information in your property marketing to attract tenants and buyers.
  • Tenants: You'll want to work with a tenant representative who "gets it" so you're positioned to take advantage. To get it, the agent needs to understand the credits and their geography, AND have connections with the state and consultants to insure that any business decisions are reliable.
Gwinnett County's new map appears to the right... you'll see that their LDCT is a major piece of Norcross. (Thanks to Gwinnett economic development for making this information available)

Feel free to reach out for more information or to discuss the specifics of your situation. I've worked with this tax credit on several occasions and am happy to advise... $3,500 per new job can add up quickly if your enterprise is growing!

Monday, January 2, 2012

Transactions

A few of John's transactions from the past 12 months appear below. Please be patient with this section... it's very much under construction as he works to build his blog while managing ongoing client needs!

Tenant Representation
Sample 1:  Represented a globally-recognized gaming company in a 40,000 SF office lease.  This transaction involved an extremely intensive search, engagements with state and local tax and economic development experts, a multi-floor building renovation, and significant legal negotiations.  While the details of the contract cannot be disclosed, we can report that the client is very satisfied with their arrangment!

Sample 2:  Represented an Atlanta-based financial services organization that does business in 18 states. This was a 25,000 SF complex sublease transaction involving significant monthly rents, a large amount of personal property, and construction modifications. The client has since engaged John to represent them nationally.

Sample 3:  Represented a startup division of an established Canadian software company as they established their first office in the United States.  This was a 10,000 SF sublease involving technology infrastructure assessments, personal property transfers, and a direct lease that begins with the expiration of the sublease term.

Sample 4:  Represented a healthcare tenant in a 22,000 SF free-standing office lease in the Atlanta suburbs. This same tenant engaged John in this lease after seeing what John was able to accomplish in a 5,000 SF retail transaction on their behalf elsewhere.


Landlord Representation
Represent multiple office, light industrial, and medical property owners in lease transactions.  Sample properties include:
  • Multiple 10,000 SF sublease spaces in Class A office buildings
  • An 8,000 SF space in a single-story Class B office building.
  • An 11,000 SF, two-tenant light industrial building.
Buyer and Seller Representation
Experienced in working with both buyers and sellers through multiple millions of dollars worth of transactions... through some VERY tough markets for selling buildings.  Samples of completed sales include:
  • A 14,000 SF Flex building
  • A 14,000 SF office building
  • A 15,000 SF industrial building
  • A 6,000 SF shell-condition office building
  • A 35,000 SF office building, including a full projections for a gut-and-rebuild