Tenant Representation Action Plan
One of the results of completing many lease transactions on behalf of tenants has been the evolution of a systematic approach to tenant representation. This approach eliminates wasted time and promotes the competition necessary to achieve the best possible results in a particular marketplace. WHPounds Commercial Real Estate's goal is to complete your firm’s real estate requirement objectives and to save you time, money and aggravation.
The process starts at the initial meeting and continues through occupancy. Although each transaction is unique and, therefore, approached differently, the following steps are taken in every lease process in which WHPounds Realty represents the tenant.
Action Plan Process
Definition of Requirement
Preliminary Negotiation Strategy and Actions, Request for Proposal
Each step is described in greater detail below.
1. DEFINITION OF REQUIREMENTS
In concert with our client's senior management and/or relocation team, WHPounds Realty will work with you in developing an ideal model for your new facility. The model will establish an objective benchmark upon which to compare the alternatives available in the marketplace.
Developed through an analysis of your current and planned facility, the following requirements will form the basis of the initial search criteria:
Project Schedule: To negotiate a favorable lease it is important to have enough time. At the outset, WHPounds Realty develops a project schedule which keeps the project on target.
Existing Lease Analysis/Current Needs: To determine the client's obligations under the existing lease, WHPounds Realty starts with a lease abstract. It is important for the team and the client to discuss all of the client's needs in advance so that the transaction is tailored to the client requirements. WHPounds Realty has devised a tenant needs analysis questionnaire to assist the tenant in defining and quantifying their needs.
If deemed appropriate, WHPounds Realty will recommend and work in tandem with an architect. A qualified architect can study your company’s workflow and pattern and from this devise an optimal space plan. This process is referred to as programming. The space plan will become an integral part of the property selection process.
Location: Geographic relationships to customers, suppliers, and public transportation, labor availability, employees, image and environment, area amenity needs, etc.
Building: Square footage, floor size, ability to accommodate special requirements (i.e., computers, telecommunications, storage), corporate identity, parking, security, on and off site amenities and special needs are considered.
Time and Cost: Budget, ownership structure (lease versus buy, capital investment, before and after tax cash flow), timing of construction and occupancy could critically affect the financial outcome.
These steps establish basic criteria that, when combined with WHPounds Realty's knowledge of the real estate marketplace, can narrow the broad field to the best selection of alternatives, reducing the time costs associated with relocation projects.
2. MARKET SURVEY REPORT ON AVAILABILITIES
In this step, each available property listing is compared to our client's selection criteria. To make an informed decision WHPounds Realty will present an initial report on all availabilities that both closely and loosely fit your requirement.
All of the available space in the area is catalogued in WHPounds Realty's database. In the case where the preferred target area is expanded, this market survey becomes more comprehensive and can include comparisons of infrastructure, tax rates, population, employment, transportation, amenities, and other demographic statistics, county and other municipal programs for economic development, and availability and cost of housing.
3. SELECTION OF MOST QUALIFIED FACILITIES
This step reduces the available choices to a manageable number of availabilities before investing valuable time and cost into the space plan and the investigation of selected building's ability to handle your requirements. To reduce the choices, the following actions will be taken:
Joint Review of the Market Survey Report: The Market Survey Report will also include an overview analysis of the market relative to vacancy rate, WHPounds Realty’s opinion of the direction of market price and tenant negotiation leverage potential. From this review, we will select an appropriate number of properties for physical inspection.
Inspection Tours of Properties: Representatives of your firm along with WHPounds Realty broker(s) will visit and inspect the selected buildings to evaluate floor location, views, value of the building installations, the building's physical condition, and the character and quality of the site and its surrounding neighborhood.
Selection of Most Qualified Buildings: We will jointly produce an accurate and balanced account of each property visited, weighing its stated model requirements against first hand observations, market understanding, and preliminary financial analysis to select a smaller group of most qualified buildings.
4. TECHNICAL REVIEW OF PROPERTIES
A Technical Review is a critically important step in the relocation process. In this step, a preliminary space plan is drawn and special operating requirements are defined (i.e., additional air conditioning or power for computers, availability of telecomm connections, floor loads for files and libraries, employee cafeteria, etc.). The space plan identifies the size requirement, workflow, and base building structure and systems needed. While some building owners provide this service, many businesses engage an interior architect/engineer to help ensure objectivity at this stage. The cost of these preliminary studies is extremely modest. In addition, the architect/engineer can verify measurements, estimate the costs of building out the space, and identify potential problems in interior construction, life safety and mechanical systems, environmental hazards, and other issues critical to the quality and cost of occupancy. WHPounds Realty will participate in these analyses.
Most importantly, the Technical Review reduces the number of alternatives for the final decision and helps to formulate the negotiation strategies and actions WHPounds Realty and your firm will adopt at preferred locations.
5. PRELIMINARY NEGOTIATION STRATEGY AND APPROACH
At this stage, experience shows that one or two facilities will likely be considered as highly appropriate with another one or two considered as having back up potential. WHPounds Realty will present to you a negotiation strategy, which addresses the recommended buildings with which to begin negotiations, and the method of approach we will use with the owner.
If the Request For Proposal method is selected, WHPounds Realty will prepare a detailed form requesting the appropriate parties to respond to the rent or purchase price, escalations, capital improvements, term, expansion and renewal options, specific structure, electrical/mechanical systems and site information. Each Request for Proposal will be tailored based on the information developed in the prior Technical Review step. If an offer is developed, the office location team from your firm and WHPounds Realty will jointly determine an aggressive position based on your needs, our knowledge of current market prices, the owner's needs and the estimated negotiating leverage position.
6. FINANCIAL ANALYSIS OF PROPOSALS
All significant quantitative and qualitative information contained in the owner's response to the Request for Proposal will be reviewed by WHPounds Realty. This report will include:
Financial Comparison: Utilizing our proprietary ProCalc© program, WHPounds Realty will compare the proposals on an economic basis. WHPounds Realty also has the capability to utilize other lease analysis programs if their tenant client has a preference. WHPounds Realty will modify the model program in order to incorporate other costs our clients may want to include or compare projections versus sales or revenue projections. From this analysis, WHPounds Realty receives the foundation to begin final negotiations.
Operations Analysis: The building’s operations and services will be analyzed and compared. This analysis includes, but is not limited to, HVAC systems and their norms of operation, building security, operating expense analysis and overtime charges for additional services.
Building Ownership Stability: This is an important consideration when comparing services and the ability of the landlord to continue to provide them. The investment horizon of many of owners varies and directly impacts capital improvements and maintenance. In the area of financial stability of ownership, the maxim, "An ounce of prevention is worth a pound of cure", is very relevant.
This report will serve as the foundation for you to select the optimum facility for final negotiations and to identify back up choices should these negotiations prove unsatisfactory.
Finally, WHPounds Realty, working with your company’s senior management and its legal counsel, will negotiate a lease agreement that satisfies your needs in terms of economics, interior construction, and contractual flexibility. These negotiations will draw upon the significant amount of data collection and analysis conducted in previous steps. Specifically, the team will seek to secure favorable terms with respect, but not limited, to the following issues:
Economic Factors: These may include such items as purchase price or rent, escalation formulas, maintenance, overtime HVAC, building installation improvements, dollar allowances, moving expenses, and security deposit.
Construction and Occupancy: This may include such items as definition of substantial completion, penalties, responsibility for delays, and rights to terminate.
Contractual Flexibility: These may include such items as options to renew, expand, sublet and assign, definition of default, service interruption, subrogation and subordination.
The role and responsibility of each team member will be determined prior to the negotiations. Typically, WHPounds Realty’s role is to negotiate all economic factors because of its experience in executing these transactions and of the proven value of having a third party act on your behalf. This buffer allows you to deliberate and to counter propose with greater control of timing and with enhanced objectivity. Both ingredients are critical to successful negotiations.
8. LEASE PREPARATION
Typically, the landlord will provide the lease form. However, an option is for you to submit the lease. Either way, WHPounds Realty will work closely with you and your legal counsel to negotiate a lease that is structured to meet your objectives and includes all of the previously negotiated terms and conditions.
WHPounds Realty is not a law firm and does not draft leases or provide counsel on legal matters. We recommend you retain legal counsel for the lease review and can, upon request, recommend lawyers experienced in real estate matters.
9. FOLLOW UP
As part of its continuing service, WHPounds Realty will support your firm in its transition to its new facility. If requested, we will provide you with names of quality service firms that you may need such as movers, communications consultants, stationers, and interior contractors. Further, WHPounds Realty will work with the transition team helping to monitor contractually defined work dates and to resolve problems on your behalf.
The goal of WHPounds Realty is to help your company obtain the type of facility that meets the company's operational requirements at the best possible occupancy cost and most favorable contractual terms. The eight step process, as described in the Action Plan, achieves these goals.
Many WHPounds Realty clients have found that the methodical process achieves other important benefits. First, the decisions are based on objective market and financial data. Since the WHPounds Realty broker represents your company, and not the property owner, the responsible broker can provide to you full disclosure of all pertinent information. Secondly, the broker through his experience in handling a number of transactions becomes an active member of our client's team, which is usually not familiar with multiple issues and problems involved in a real estate transaction. This leads to an easier relocation, with a minimum of current and future problems.