BLOGS: Real Estate for Fast Growth Companies
Sunday, January 6, 2013, 10:41 AM
Tuesday, October 9, 2012, 6:05 AM
How we Built the Law Firm Office of the Future (And Saved a Ton of Money) - Part 1
Our space committee did not accomplish this outcome alone. We worked very closely with our pioneering architect, Steve Polo and his team at OPX, who led (and sometimes dragged) us through this unique visioning process, using proprietary software and design approaches focused on our specific needs and customized to maximize the services we offer. His focus on the creation of an integrated operating environment truly brought us to new vistas. Our top flight brokerage professionals, Scott Hoffman and Audrey Cramer at Cushman, participated often in our creative sessions, adding real time guidance about market conditions and dynamics. Our general contractor, Linda Rabbitt at Rand Construction, worked step by step with members of our space committee to make sure that the design concepts we developed could actually be constructed into a reality. Our firm’s facilities manager, Kyle Godat, was absolutely indispensible to our success. He functioned like a magician – using his “higher powers” to keep us functioning as an aligned and integrated group and to prevent us from deviating from our chosen path of innovative change (no small task for a bunch of lawyers who are harder to herd than any animal on planet earth). He also seamlessly handled the unanticipated issues that invariably rise during a major office design/build project.
Another key contributing factor to this significant accomplishment was that every single person in our office and many of our professionals from other firm offices made material contributions to this visioning effort. We deliberately utilized internal “crowd sourcing” tactics that required broad based participation and we achieved extraordinary engagement from our colleagues with these processes. For example, for one office-wide survey that we conducted to identify key factors to be considered in a new office design, we achieved a ninety-eight percent participation rate.
Our resulting vision of the “law firm office of the future” turned the legacy space we had inhabited for the previous ten years on its head. We discovered and integrated operating efficiencies into our new office that we had never previously considered to be possible. Our innovative (for a law firm), light-filled space empowers us to collaborate with our clients and each other in unparalleled ways and compellingly increases our working effectiveness. We created office space that is easily adaptable, enabling us, in a sustainable way, to accommodate both anticipated and unanticipated changes in our industry and the ways we serve our clients. Both through the visioning process we pursued and with the resulting exceptional office space we designed and constructed, we have reinforced our unparalleled culture and our collegial connectivity. By setting our goals so high and then patiently working our way through the “process of change,” we cracked the code on leading professionals through a significant transformation. For the other offices within our firm, we not only set a new precedent for office design, but also confirmed that innovative change in a law firm (is not an oxymoron and) is achievable. And, of vital importance to many, by virtue of this process, we saved our firm staggering amounts of money.
Stay tuned for Part 2 of this story - where I will share with you some of the specific accomplishments we achieved in our law firm office of the future.
Thursday, June 7, 2012, 1:02 PM
Womble Carlyle Real Estate Team Serves as Lead Counsel on Deal That Nets WBJ Best Real Estate Award Second Year In A Row
It’s a good real estate buy when the Washington Business Journal gives an award for it. It’s an even better deal when they give a second award for selling it, too.
Last year the Business Journal named CoStar Group’s purchase of 1331 L Street N.W. the 2010 Best Real Estate Deal in the Urban Office Sale category. CoStar Group won the award again this month for the sale of the property.
What made the deal so remarkable? With a Womble Carlyle real estate team serving as legal advisors in both deals, CoStar snagged prime real estate in the nation’s capital in 2010 for less than half the market rate. CoStar also negotiated a $6.1 million property tax abatement package from the D.C. City Council.
Monday, March 26, 2012, 11:42 AM
The Leasing Tool Kit - Part Two
Here are the remaining 5 leasing provisions that a high growth company should include in its leasing “tool kit:”
1. Relocation Rights. Relocation rights in a lease enable the company to relocate its premises to another location in the building that may be adjacent to unoccupied space, thereby positioning the company to more efficiently consolidate its operations in the building as the company grows.
A high growth company that incorporates these provisions into its occupancy leases will be better positioned to manage its changing real estate needs, including as it grows organically or through merger and acquisition activity or as it may change its area of geographic focus.
Labels: broker, choose, high growth companies, lease, lease clauses, real estate, strategic real estate plan
Friday, March 23, 2012, 12:49 PM
The Leasing Tool Kit - Part One
particularly as the company continues to grow. In my next few blog posts, I will share my top 10 suggested key lease provisions to include in a high growth company’s leasing tool kit. Here are the first 5 clauses:
1. Customized Lease Terms. The company should seek maximum lease terms that best suit its anticipated expansion plans, as reflected in its strategic real estate plan. For example, the company should pursue shorter lease terms that include renewal options for leases in jurisdictions where the company may merge with or acquire another company. This will best position the company to eliminate redundant lease holdings. Conversely, longer lease terms (that usually result in a more favorable rental rates because landlords prefer them) can be accepted in locations where the company has a clear sense it will be operating for the foreseeable future.
2. Early Termination Rights. Early termination rights in leases permit the company to terminate the lease prior to the expiration of the stated lease term. Typically these rights require the payment to the landlord of an early termination fee (as compensation for the premature termination of the rental income to the landlord) plus the reimbursement of the landlord for any unamortized amounts of the tenant improvement allowance and brokerage commissions associated with the lease.
3. Expansion Rights and Rights of First Opportunity to Negotiate. Expansion rights and rights of first opportunity to negotiate enable the company to increase the size of its premises in a given building as space becomes available. An expansion right gives the company the option to lease specific (and often adjacent) space by a certain date. A right of first opportunity to negotiate permits the company to lease other space in the building, regardless of its location, as it becomes available. Both of these options enable the company to expand while keeping transaction costs down, since expansion space can be leased on the same terms as the initial premises and is often simply added as “additional premises” through a lease amendment. However, the rental rates and other economic terms for space resulting from the company’s exercise of rights of first opportunity to negotiate will likely be based on the terms prevailing in the market at the time such space is leased by the company. If the landlord and the company cannot agree on the prevailing market terms, then they should resort to a “three broker” method process for the determination of these key lease provisions.
4. Contraction Rights. Contraction rights permit the company to reduce the size of its premises and the associated rental obligations under the lease. As with the early termination right described above, these rights may be conditioned upon a payment to the landlord of some type of compensation for the loss of the future rental stream on the space that the company gives back, plus any unamortized tenant improvement allowance and brokerage commissions associated with that space.
5. Renewal Rights. Renewal rights give the company the right to extend an existing lease term for a stated period. The company can negotiate in advance for the rental rates and other economic terms for the renewal term that would give the company some predictability in its budget (i.e., rent for each year of the renewal term could increase at the same 3% per year escalation rate that the company would pay each year during its initial lease term). Depending on the tenant-friendliness of the market, the company might have enough leverage to renegotiate for even more favorable rental rates prior to exercising its renewal options. If the renewal rental rates are not specified in the lease, the company should at a minimum have the lease specify that the “three broker” method will be used to determine the economic terms for the renewal term.
Labels: high growth companies, lease, lease clauses, real estate, strategic real estate plan
Thursday, March 8, 2012, 3:00 PM
Checklist for Selecting the Right Broker – Part Two
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.
Labels: broker, choose, high growth companies, real estate, strategic real estate plan
Wednesday, March 7, 2012, 2:55 PM
Checklist for Selecting the Right Broker – Part One
1. Connection with your Company’s Objectives: It is important that your broker understand your company’s business drivers/motivators and maintain a focus on these motivators throughout the process of a real estate transaction. You should try to gain a clear understanding of how the broker generally views transactions and how he or she would typically approach your company’s proposed transaction. Does the broker have a clear “end-user” perspective and an organized thought process? Will he or she process the numerous issues that will be associated with your company’s transaction in a manner that works in conjunction with the overall goals and objectives of the company? To help evaluate these issues, ask the broker these questions:
--What transactions have you completed that are similar to the transaction we intend to pursue?
--Can you provide a detailed account of the process that you engaged in with these other clients to successfully accomplish their leasing or purchase transactions?
--What obstacles/tough issues did you face and how did you prevail?
--Given the basic plans for our transaction, how would you recommend that we move forward?
--What is every team member’s role in the transaction?
--Who will be my primary contact(s)?
--Who will be involved on a day-to-day basis and play an active role with my transaction.
--Does the team provide a “deep bench” with multiple skill sets and talents?
--To gain a clear understanding about the prospective broker’s primary jurisdiction, ask where the brokerage company does most of its business. Are the brokers national, regional or local players?
--If your transaction is national in scope (i.e., you are “relocating” your company from one jurisdiction to another), is the brokerage company geographically positioned to effectively service your deal and your needs?
--Does the broker have knowledge about what other companies comparable to yours are doing in other markets?
--Has the broker evaluated the potential for reduced real estate costs to your company across your real estate portfolio? For example, can the broker tell you where there are less expensive real estate markets to which you should consider relocating certain of your company’s departments?
4. Experience and Expertise: Try to determine the number and type of transactions completed by the broker and then evaluate whether they are “on point” for the deal you will be pursuing. To help evaluate these issues, ask these questions:
--What has this specific brokerage team done in the past as a team?
--Demonstrate how your team thinks creatively and has used innovative techniques to solve difficult problems.
I will share the remaining checklist items in my next post. I look forward to hearing about your additions to my checklist.
Labels: broker, high growth companies, real estate, strategic real estate plan