Monthly Archives: May 2020

What Can You Expect from Your Commercial Property Management?

What Can You Expect from Your Commercial Property Management

When it comes to Commercial Property Management Services, selecting the right company can make the difference of having a good experience compared to a bad one. Below is a quick summary of what you can expect when hiring a commercial property management company and some questions to ask when interviewing them. From accounting and administration to maintenance, effective commercial property management requires vision, accountability, and a dedication to creating value.

Don’t be afraid to ask a lot of questions, getting this information will help give you an idea of how you will be taken care of. Request to see copies of their monthly management reports, ask to see a list of their complete services, discuss the type of software they use and how large their staff is. Here are a few questions you can a potential or current commercial property management company:

  • What does their portfolio consists of?
  • How many projects do they manage?
  • How many square feet of office, industrial, and retail space total do they currently have?
  • Are their portfolio managers licensed real estate professionals and do they have relevant industry experience?

Commercial Property Management Should Create Less Stress

Good commercial property management helps save property owners from having to Worry about:

  • Rent collections
  • Track and assess late fees and holdover rents
  • Deal with broken air conditioner units in the middle of summer
  • Fix a leaking roof during monsoon season
  • Prepare accounting statements such as balance sheets and P & L statements

Request a Scope of Services

A good property management team plays a critical role in the success of your property. Having a commercial property management team that is responsive, knowledgeable, and friendly will take responsibility to

  • Create additional value at your property
  • Hire the most experienced, trustworthy, and reasonably priced vendors to perform services at your property
  • Manage and maintain your property
  • Provide you with detailed, monthly financial statements and answer any questions you may have about the financial operations of your property
  • Process distributions to you, as instructed
  • Minimize your operating costs
  • Build tenant relations through friendly, responsive service

Phill Tomlinson is a Sales and Leasing broker with Commercial Properties, Inc. (CPI) in Scottsdale Arizona and focuses on Landlord representation in the Loop 101 North Corridor. Commercial Properties began business in 1981 specifically to manage industrial properties. In the early 1990’s, they began managing office and retail spaces as well. Although the commercial property landscape has changed, their commitment to service has not. CPI ‘s impeccable reputation for property management precedes them and they proudly derive most of their business from referrals and repeat customers, including R.E.I.T’s, partnerships, private trusts and individual investors.

CPI has successfully managed hundreds of properties for their landlords. To learn about how Commercial Properties, Inc. can transition your property or to see how they have helped other landlords, click on this link to get answers on Commercial Property Management – What can you expect?


Investing In Commercial Real Estate?

Looking to invest in Arizona Commercial Real Estate? At ICRE Investment Group, we work with commercial investors, property owners, companies, banks, and commercial loan servicers seeking the highest quality of services in the greater Phoenix, Scottsdale, Mesa and Tempe Arizona regions. Contact us for more information.

8 Things to Consider Before Hiring a Contractor

8 Things to Consider Before Hiring a Contractor

Let’s look at things to consider before hiring a contractor to do work on your commercial property. Our friends at Bleuwave Facility Management helped us put together this helpful fact sheet. At Bleuwave, we recognize that your home or commercial building project is one of the biggest investments of your life. Before entering into a transaction of that size, we always suggest that clients do their homework, check references, and ask lots of questions to make sure they are a good fit with the contractor. Once construction has commenced, it can be very costly and challenging to make changes to your plans, so take time to consider what you want before getting started. As they say, “An ounce of prevention is worth a pound of cure,” and that most definitely applies here.

8 things to consider before hiring a contractor:

1. Always check references and not just the ones the contractor provides you. There is usually easily available information from the local municipalities and the building department. See if they have other jobs going on in the area and speak to those owners for a more candid view. Ask the trade partners and supply chain about the overall character of the contractor as well.

2. Go check out a few similar projects of the potential builder. Are the project sites neat? Does the project manager seem like someone you could work with? Are permits displayed? What’s the vibe? Does the site and workers appear safe?

3. Only start construction after signing a written agreement. Read and understand the contract and have a lawyer review if necessary. You must comprehend the terms of the contract.

4. Hiring a general contractor based solely on price is a common mistake that people make when choosing a contractor, and it can also be the one with the most ramifications. It is tempting to look at proposals that look the same and go with the lowest one. However, those proposals typically look the same but have significant differences in the quality of craft, materials used, or budgeting manipulation (contractors who charge less upfront then create change orders to increase the cost of the project). All of these concerns should be addressed upfront in the bidding process and during contract negotiations.

5. Specify a construction schedule and get it in writing with verifiable milestones so everyone can monitor the progress. Require the contractor to notify if there is a change to the plan. A schedule that appears too short is an indication that quality may be jeopardized, and one that seems too long indicates a lack of commitment or available resources for the project

6. Make sure you discuss and document how payment installments and invoicing will occur. Verify that invoices will be issued at agreed intervals so money can be ready on a set schedule. Assure that a receipt or a lien waiver accompanies each payment.

7. Identify withholdings for the end of the project; this is often called retainage. It is an agreed-upon portion of the payment to ensure the contractor has good reason to complete the project. A typical amount is 5% – 10% until the contractor fulfills their contractual obligations.

8. Have a regular means of communication, such as a weekly telephone call, meeting, or progress email. The better contractors typically have an interactive website or app that allows for easy communication and sharing of pertinent information.

J.J. Levenske, President
O: 480-744-0000
M: 218-251-8826
2350 E Germann Road, Suite 25
Chandler, Arizona 85286

Renegotiating A Commercial Lease

Renegotiating A Commercial Lease

Let’s examine renegotiating a commercial lease. If you are currently leasing commercial space and your lease expiration date is within a year from expiring. Now is the time to consider reviewing your lease and/or renegotiating your lease down to today’s market rates. Many commercial tenants are struggling to pay lease rates from 3 – 5 years ago as the economy fluctuates. We, at Commercial Properties, Inc. are in the trenches, working with landlords, owners and tenants navigating through the commercial real estate up and downs. We work with tenants everyday looking for space, but many of them would prefer to stay in their current lease. They struggle to get the landlord or owner to lower their lease rates or work with them to find a solution. My best advice for negotiating a lower rental rate is to work with a professional commercial lease consultant who can do this for you. I have successfully advocated for many tenants and negotiated, often substantial, rent reductions. Doing this effectively takes both patience and experience. Remember that without any help whatsoever, you are going to possibly remain paying excessive rent.

Below are a few basics to follow when renegotiating a commercial lease

Start Early: Lease renewal negotiations should begin six (6) to twelve (12) months before the term expires. If you can’t get a decent renewal rate and decide to move, would you rather know this with six months or six weeks left on your lease term?

Create Competition for Your Tenancy:
Even if you don’t want to move, shop around and collect written offers from other landlords. These can be used as leverage when renegotiating with your current landlord.

Have the Landlord Give the 1st Offer:
For a new lease or a renewal, resist making the first offer. By doing this prior to your renewal, it implies that you will stay – thereby undermining your negotiating strength.

Ask for More Than You Need:
When negotiating for free rent, tenant allowance, or any other term, always ask (negotiate) for more than what you need. If you need three (3) months of free rent, ask for five (5) months. Resist beginning at the level that you are prepared to accept. Also, by asking for more than what you expect to receive, you position yourself to strategically give and take depending on the importance of certain items to you.

Negotiate Non-Rent Issues:
These include parking, signage, carpet, paint and any deposit or personal guarantee which you may have previously agreed to. Do you need more spaces for customers and/or staff? Would you like parking stalls closer to the property doors? Would you like to see more/better signage with your business name outside of the property? Is the landlord holding a deposit of yours? As a current tenant, the landlord will want to you to remain and the cost with these non-rent items are typically less than having to attract a new tenant.

The biggest mistake that tenants can make is not developing alternatives to their first choice. Once a landlord believes that a current tenant is planning to renew, immediately the tenant loses his negotiating leverage and the landlord is in control. We often hear “I don’t want to move” or “It will cost too much to move” both of which are deadly statements if you want to renegotiate your lease. Every tenant must develop a plan “B”, “C”, etc. in the event you choose not to accept what the current lanlord is offering. This will allow you to enter the lease renewal negotiation in a position of power. A professional commercial lease consultant will ensure that your landlord is aware of your options you have in the market without creating an adversarial relationship. They will make you aware of deadlines and provide you with the negotiating leverage you need to achieve the best economics and business terms. Remember that tenants don’t get what they deserve; they get what they negotiate!

If you’re thinking about renegotiating a commercial lease, allow us the opportunity to work on your behalf and help give you the option of staying in your current space.


Investing In Commercial Real Estate?

Looking to invest in Arizona Commercial Real Estate? At ICRE Investment Group, we work with commercial investors, property owners, companies, banks, and commercial loan servicers seeking the highest quality of services in the greater Phoenix, Scottsdale, Mesa and Tempe Arizona regions. Contact us for more information.

Abated Rent on Commercial Leases

Abated Rent on Commercial Leases

Let’s examine abated rent on commercial leases from both the landlord’s perspective and the tenant’s perspective.  The abated amount can be recaptured if a tenant defaults on the agreement. 

Abated Rent: A Landlord’s Perspective

In today’s market, it is common for landlords to give fully or partially abated rent as a lease concession to tenants. Occasionally the abated amount is staggered throughout the term (e.g., one month’s rent is abated every year), but more often the abated rent is front-loaded at the beginning of the term. The Landlord would like to have the Abated Rent Recaptured If Tenant Defaults but the Abatement is factored into the overall economics of a lease deal, based on the tenant’s payment of rent during the entire length of the term. Landlords should make sure that the lease allows the landlord to have the abated rent recaptured in the event of a tenant default.

A common mistake that landlords make with respect to abated rent is they state that the rent during the abated period is $0, free or abated. Instead, the lease should provide for a rent amount, but state that the rent is abated if tenant fully and faithfully performs for the entire term of the lease. If the tenant defaults, then the landlord can recapture the abated amount in its damages.

Abated Rent: A Tenant Perspective

The same type of situation can occur with a Tenant. They should be careful to negotiate these provisions as well. First, the tenant should require that the landlord may only recapture the abated portion if the landlord terminates the lease due to a tenant default. The full and faithful performance language is ambiguous and a late payment of rent for 1 day (or similar minor breach) could be interpreted as a trigger event. It would be unfair for the landlord to claim that the abated amount is due unless the breach is material and the tenant has an opportunity to cure and fails to do so.

Second, the tenant should negotiate that the landlord’s ability to recapture the abated portion is reduced over time, since the landlord is receiving the benefit of the lease over time. For example, if the lease has a 10 year term and tenant performs for 7 years before breaching, the tenant could negotiate that the landlord received 70% of the intended benefit of the lease and should only recapture 30% of the abated amount. This is a business issue for the landlord and tenant to negotiate. To avoid having a Landlord have the Abated amounts Recaptured If Tenant Defaults, the tenant should consult an attorney to make sure the appropriate language is in place to protect their interests.

Prior to using any language or concepts from this blog entry, consult with an attorney.


Investing In Commercial Real Estate?

Looking to invest in Arizona Commercial Real Estate? At ICRE Investment Group, we work with commercial investors, property owners, companies, banks, and commercial loan servicers seeking the highest quality of services in the greater Phoenix, Scottsdale, Mesa and Tempe Arizona regions. Contact us for more information.

 
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