Checklist for Selecting the Right Broker – Part Two

Here are the remaining items I include on my checklist to help clients evaluate whether their broker is serving them well.

5. Financial Analysis Skills: Try to evaluate whether the broker is capable of helping the company view the transaction from a financial perspective. The broker should have some basic knowledge about accounting and financial principles. The broker should be able to demonstrate an understanding of how the transaction will affect the company’s books and its bottom line. Here are some specifics to focus on:
--The broker should be knowledgeable about the financial and legal implications of a proposed transaction. The financial implications extend far beyond the rental rate and tenant improvement dollars. A good broker should understand how lease clauses can ultimately impact your company’s bottom line.
--It is also helpful if a broker understands how a tenant’s transaction will affect the landlord’s portfolio and how the deal works from the landlord’s perspective. The broker will need to be able to marry your goals with those of the landlord, and different approaches are required for different types of landlords (i.e., private landlords may have different objectives from publicly traded REITs). It is critical that the broker has a proven track record of negotiating transactions from commencement to completion.

6. Knows Your Company: From your interview with the broker, it should be clear that the broker has researched your company and has an understanding not only the type of business in which your company is engaged, but also your company’s primary customers, as this would demonstrate
that the broker has the company’s best interests in mind. Before you engage a broker, you would need to feel that the broker is looking out for your company’s best interests, and not just focused on executing a transaction and collecting a commission. Here are some specifics to focus on:
-- The broker should serve as your guide throughout the entire process and continue to consult with you following the documentation of the transaction.
--The broker’s role is to anticipate problems and navigate accordingly and to fully research all available options and provide prospective client with recommendations as to how to proceed.
--The broker should be assisting you at every point in the deal. For example, in a lease transaction, the broker should be evaluating the operating expenses to be passed-through to your company; analyzing your parking needs; understanding jurisdictional incentives and assessing other specific leasing risks. The broker should demonstrate a “full service” approach to the transaction and your company and should ensure that the real estate deal will coincide with your company’s business plan from all perspectives, including costs, leases terms, demographics, liabilities, location and access.
--The broker should evaluate how the construction and/or renovation of space to be occupied by your company will impact your company’s business operations and compare those challenges to the ones that would be presented by a complete relocation of your company’s operations through a move to entirely new space.
--The broker should be someone who is active in your company’s specific marketplace and has “real time” knowledge about that market – in other words, you are looking for a broker that is positioned to be thinking about his/her clients in the context of actual market conditions and watching out for opportunities best suited to his/her clients.

7. Broker Materials. The broker should provide a prospective client with case studies of comparable transactions. These would provide insights into how the broker will approach your company’s proposed transaction. A broker should provide a “sanitized” version of sample financial analyses. This will provide an indication of the level of understanding the broker has with the financial implications of a transaction.

8. Engagement with the Process. As is the case with any interview process, has the broker asked good questions (to see if he/she has given your meeting and future relationship some critical thought) and whether you feel there was any chemistry between you? Did you click with the broker? Do you feel you could work with the broker and his/her team for the duration of the transaction, which could literally go on for years?

9. Is the Broker a Relator? Consider asking targeted questions designed to underscore whether the broker has strong relationship-building skills. The length of the broker’s client relationships speaks to the true quality of the broker. How long the broker has worked with his/her signature clients. One of the most important things and possibly even one of the determinative factors for some company’s is whether the broker is a relator and how the broker feels about relationships – without a strong interest and focus on building long term relationships, the broker will not likely be a match for some companies who value relationships as one of their fundamental considerations.

A very good broker can have a vital and compelling impact on the stress level you will face in a company move. Take the needed time to carefully and thoughtfully select a broker who can best serve your company’s real estate needs.

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