The Role of a Tenant Rep

If you are planning to lease commercial space, understanding the role of the Tenant Representative as well as the typical process will be helpful in determining how to proceed. A qualified tenant Representative will present you with a work plan that shows you the process that will be used to identify potential space that fits your business’ needs. Incorporated into this plan will be the following:

A determination of the amount of space you need for your business.  A Tenant Rep will assist you in calculating your actual space needs (number of square feet) and may also help in determining particular layout needs, circulation through the space and level of need for kitchen, restroom and reception spaces. This will save your business overhead costs by helping to prevent you from leasing too much space.

When the geographical areas under consideration are clear, a Tenant Rep will investigate available properties and determine which are most likely to be a good fit based on your needs. This is done by analyzing the marketplace and the space available to determine not only size and use considerations but also creative options for locating your business to save money or provide for expansion down the line.

Negotiating Your Lease

Once you have selected several locations that would work for your needs, a good Tenant Rep will optimize your negotiating position by creating competition for the requirement. Several owners vying for a good tenant will create a result that includes concessions and incentives that very probably will exceed the norm in the marketplace.

A Tenant Rep will also protect you during lease negotiations. There professionals know the ins and outs of real estate transactions and can be invaluable in helping you avoid possible omissions in the lease. For example, a Tenant Representative would ensure you retain such options as subletting or termination in case you eventually shrink your organization, outgrow the space, or the business fails. Options for an exit strategy should also be considered given the turmoil in the economy.

Additionally, the identification of lease provisions that could result in additional charges during the lease term should be discussed with your Tenant Rep. Hidden costs of leasing can create difficulties in the Landlord/Tenant relationship so early identification and negotiation of these terms, which are often overlooked, is essential.

Details, Details, Details

Tenant Reps are expert at preparing the paperwork and addressing other details of the lease negotiation. A professional Tenant Rep is familiar with real estate documents and how to correctly compare the terms in various proposals. In addition, the Tenant Rep will help you avoid signing a proposal or other paperwork prematurely or without full disclosure.

Lastly, during the entire leasing and/or renegotiating process, the Tenant Rep serves as a buffer between you and the potential landlord which helps to keep your relationship with the landlord cordial in the event that you lease the space.

As you can see, a Tenant Rep has knowledge and experience that is of great value when determining where to locate your business and, as well, to ensure that you have the best terms available when you are ready to sign the Lease.

The economic woes of the past few years have put the brakes on new retail development, for the most part, so the absorption of existing inventory will help stabilize the market as well as increase rents as demand increases and inventory decreases.

For more information, read the CoStar article at the following URL:

http://www.costar.com/News/Article/Retail-Outlook-Cautious-Optimism-as-Tipping-Point-In-Shopping-Center-Rents-Expected-In-2012/135691?ref=100&iid=267&cid=0804B9817260112F3BDC31197EF4A3E5

Attitudes are changing about home ownership. Especially in these economic times, the purchase of a home no longer offers the investment return or the security that is has for many years. The question of what makes sense financially and the level of comfort with debt have become meaningful factors in the decision of whether to rent or to purchase a home.

“While new graduates and young married couples are often postponing the purchase of a home for financial reasons, the divorce rate is also contributing to the burgeoning rental market” states Katherine Wellington, Principal of Investment Property Specialists of Framingham, Massachusetts. “After all, as a result of divorce you end up with two households where there was one before – and many times the second household is a rental. There just isn’t enough income to support two mortgages.” Often the individuals involved are in their middle aged years – suggesting that the demographics of those seeking apartments are shifting right along with the rest of the market. “Baby boomers are looking for different amenities, in many cases, than their younger counterparts,” Ms. Wellington continues. “Developers, or owners of apartment dwellings planning to rehab, should take note that luxury finishes and appliances as well as easy access and social opportunities are attractors for this demographic.”

The Apartment Market is Thriving
This increased demand for rental housing has led to a considerable uptick in multifamily construction, the National Multi Housing Council (NMHC) reported in its latest Quarterly Survey of Apartment Market Conditions.

The pace of development activity has increased in most markets. Two-thirds (67%) of respondents noted considerable activity, either in the planning stage or actual new construction. In particular, 20% said developers are breaking ground on new projects at a rapid clip. The other 47% reported an increase in pre-construction activities-acquiring land, lining up financing, getting building permits-but not much actual construction yet. Even with this increased activity, more than half (54%) think new development remains considerably below demand.

Summary
As the economy struggles and home ownership becomes less available to the masses, apartment demand has swelled and fueled an increase in the demand for existing units as well as development of new apartment communities. It appears, that for the near future at least, apartment living will be the choice of a larger and larger percentage of the population.

When asked about what differentiates Chex Mieux from other kennels, Pat goes on to say, “It is all about the cats. We pamper them, they receive lots of exercise and plenty of TLC. The rooms are designed and decorated to look like home. The kitties stay in condos – multi level structures with window views and soft beds. A variety of foods are available and lots and lots of special attention! We want cat owners to be able to relax and enjoy their vacation or business trip and not be worried if their pet is relaxed and happy. The primary objective at Chex Mieux is to provide the best care for cats that is possible – next to being at home, of course.”

Currently, one of the fastest growing local service provider arenas is pet services. There has been an increase of almost thirty two percent (32%) in urban areas for pet services space. Major retailers such as Petco, which has a new concept called Unleashed (with a small format store), and Especially for Pets have expanded significantly in the greater 128 area. Sole proprietors are also expanding in this market with a variety of pet care offerings.
Chex Mieux is the first in what Ms. Dowd hopes will be a series of cat kennels that she opens and operates all around the Commonwealth.

81 Speen Street stands out among its peers in the West Natick commercial office building inventory. The building offers prime commercial office space and is extremely well located – close to the major intersection of Speen and Route 135. This location attracts office and professional service providers due to proximity to major traffic routes, medical facilities and a large residential base as well as offering convenience to staff and clients.

Leasing at 81 Speen has been active and the building has only 1,700 square feet on the first floor currently available.

81 Speen Street stands out among its peers in the West Natick commercial office building inventory. The building offers prime commercial office space and is extremely well located – close to the major intersection of Speen and Route 135. This location attracts office and medical users due to proximity to major medical facilities as well as offering convenience to staff and clients.

The long-standing construction work on Speen Street is slated for completion for September 2011. Once Speen Street reopens, normal traffic patterns will resume and this major route through Natick will again be buzzing with traffic. Those coming from the east or west will also be able to approach through the lighted, existing Speen/Mill Street intersection which hosts over twenty three thousand (23,000) cars per day. Once in the neighborhood, the building offers easily accessible parking.

The site also becomes attractive, due to the visibility and ease of access, to service providers of all types. One of the growing potential uses is for pet services. There has been an increase of almost thirty two percent (32%) in urban areas for pet services space. Major retailers such as Petco, which has a new concept called Unleashed (with a small format store) and Especially for Pets have expanded significantly in the greater 128 area. Sole proprietors are also expanding in this market with a variety of pet care offerings. One of the newer concepts – cat kennels, which are well known in Europe, are now opening in various locations in the Commonwealth. With proximity to many residential units within several miles, West Natick offers service providers a large base of potential customers from which to draw.

This market will continue to heat up as the Speen Street construction is completed and the economy strengthens. It promises to be a strong market – now and in the forseeable future.

Transactions and committee approvals are returning but each one is burdensome, cumbersome and difficult. Economics are thin and all deals are evaluated on a risk averse measure as committees are tough in their review and slow to approve deals. Landlords have adjusted to a “new normal” with stabilized debt at higher vacancy levels. And while most Landlords are anxious to complete new leases and spread their overhead drag, they continue to be hesitant of new retail concepts and very wary of proposals including large amounts of Landlord funded tenant improvements. Owners are also very focused on limiting transaction costs. Failure of new tenants, in the worst case, can mean economic failure for Owners. All precautions are being taken to avoid this outcome market wide.

Total transactions continue to be approximately thirty eight percent (38%) lower than the 2006/2007 period according to Costar. However, the average size of transactions is also down precipitously – major leases of many thousands of square feet are rare and current leasing opportunities are based on extremely frugal square footage requirements.

As we move forward in a stabilizing marketplace, the following four factors are essential for success:

Efficient Maintenance and Utility Costs:

Building operation and maintenance (O&M) programs can enhance the operating efficiency of HVAC, lighting, and other energy-using systems. O&M best practices for energy efficiency are defined as those O&M activities, methods and approaches that contribute to, or are directly responsible for, producing energy savings while maintaining or enhancing indoor environmental quality and equipment reliability.

Operation and maintenance programs specifically designed to enhance HVAC and lighting systems can save five to twenty percent (5-20%) of the utility bill without significant capital investment. As well, reuse of previously built-out space, when possible, will provide tenants with attractive space while supporting both the tenant’s and the Owner’s financial standing.

Effective Assessment of Management Strategy:

As an Owner, your business plan and building management plan are essential to your success. Successful management in the current marketplace requires that your plans include periodic reviews and a system for restructuring any aspects that are not performing at the goal level. Keeping your expectations realistic related to return on investment and the time necessary to secure new tenants is essential to maintaining necessary cash flow and securing your investment.

Alignment of Use with the Current Marketplace:

All Owners and investors needs to be clear on this question: What is the highest and best value/use of the property? The answer to this question drives all other decisions! It is essential in the “new normal” to market to those who are secure, growing businesses. This requires being open to atypical uses of what was once office or research and development space as well as keeping up to date on new technologies and services which are evolving on a daily basis. Competitiveness in the marketplace will hinge on offering what is needed to those who are in need – and being the first to do so.

Effective Structuring of the Base Rent Format:

Strategies must be developed to provide landlords with the necessary debt coverage and also include effective upside opportunities such as percentage rent (a reasonable base rent structured to provide adequate coverage for debt and margin, with an additional rent based on effectiveness of location – a reasonable approach with national retailers) and minimal transaction cost drag.

Another alternative is to structure rent increases in format that is most consistent with type of use so as to make the cash flow outlay consistent with the cash flow for the particular type of business.

The exciting new opportunities in the market include new prototypes with reduced square footage; changing consumer habits, increased focus on millenials and seniors as demographic patterns shift, increased focus on LEED certified buildings to reduce utility consumption; reduced aggregate retail purchasing by consumers (which will lead to different purchasing patterns); focus on NNN costs as properties begin to compete on NNN efficiency and reduction in per person office space usage.

Additionally, demographics will drive increased health and wellness focus in building layout and egress as boomers age and access and ease of use become more of a focus – particularly in the retail environment.

In summary, the market we are move into will stabilize into a “new normal” which will include more focus on effective use of space, reduced overhead and transaction costs and increased focus on young professionals and seniors as they currently hold the lion’s share of disposable income.

What does “going green” mean for commercial real estate?

It means minimizing harmful effects both to the environment and to users. Already, over 500 buildings in Massachusetts—from schools to office blocks to manufacturing plants—have obtained Leadership in Energy and Environmental Design (LEED) certification, which is the standard for environmentally appropriate building construction/operation. And more are applying every day.

Why have they gone green?

Going green leads to increased efficiencies and lower operating costs; reduces waste; appeals to prospective tenants (70% of whom say they would consider “greenness” a positive factor in leasing decisions); leads to higher rents* and purchase prices; delivers measurable economic returns; holds potential for condensed implementation schedules; and supports corporate and community goals.

The challenge to property owners and managers is especially acute when current leases must be negotiated. The question becomes: What can you do to meet tenants’ demands for the reduced operating costs of a green building, especially if the property is not performing on that level? If you don’t pay part of the tenant’s cost, you risk losing business to a more competitive site. This means that you need to balance long-term competitiveness with the financial feasibility of immediate upgrades. Now, the question is: what level or type of green retrofit is appropriate for particular buildings and budgets? There are many possibilities to plug into your equation.

What you can do

Building construction

• Use recycled materials when available
• Minimize waste
• Incorporate solar panels
• Weatherproof the facility efficiently

Building systems

• Install the most efficient HVAC systems
• Use water saving plumbing fixtures and piping
• Use recycled building and finishing materials for tenant work
• Install energy-efficient interior and exterior lighting as well as systems that address both peak and off-peak needs

Site Options

• Re-use roof drainage to irrigate flowerbeds and gardens and to top up cooling equipment
• Use environmentally safe ice and snow melt
• Install plantings to reduce mowing and the need for petrochemicals

New Project possibilities

Re-purpose older sites. In Boston, a company is turning a former gas station site —an urban brownfield—into an electric car charging station; elsewhere, a number of shipping containers will form a building to host a bank ATM and neighborhood retail and incubator office space.

Assistance is available

Most contractors are aware of green design and specification choices. Some have obtained “Leadership in Energy and Environmental Design (LEED)” certification, which makes them experts in designing and retrofitting properties to gain maximum energy efficiency and a reduction in their carbon footprint. LEED offers many resources, including lists of steps owners and managers can take to run their buildings more efficiently.

If you aren’t working with an architect or product specifier, you can, nonetheless, find a great deal of information on the Internet concerning all aspects of going green, as well as discussions of completed green projects.

The bottom line

Keep in mind that improving environmental performance, while certainly cost-effective in the long run, can also be a realistic short-term investment. Look into it.

*Does Green Pay Off? Norman Miller, Jay Spivey and Andy Florence (July 2008)

Retail Buildings – Water use Considerations

Almost half of the building developers and owners responding to a recent water usage survey indicated that the majority of their projects employed water-efficient technologies in the design. The economics of water conservation in existing retail properties can be significant – even if limited to simply retrofitting lavatory fixtures.

LEED

For example, the U.S. Green Building Council’s (USGBC) Leadership in Energy and Environmental Design (LEED) rating system is the national standard for certifying and classifying green commercial buildings. Beginning in 2009, LEED certification requires a 20% reduction in water use from a standard “code” baseline. This requirement applies to all retail and commercial projects wanting a “green” label, regardless of their specific use.

The fastest-growing LEED rating system is now LEED for Existing Buildings Operations & Maintenance (LEED-EBOM), with growth of more than 135% in the number of projects registering for LEEDEBOM certification (2,700 new projects, representing nearly 300 million square feet of commercial and institutional space), since the beginning of 2009, through mid-year 2010.

The LEED-EBOM system requires commercial projects in existing buildings to undertake investments in water-efficiency and water-conservation measures to meet minimum savings goals. LEED-EBOM is the best system for use by most retail operators.

LEED Water Efficiency Standards

LEED-EBOM awards up to 14 points (out of 40 needed for basic certification) for efficient water performance. A project can also attain two additional points for exemplary performance and for meeting regionally significant water-use reduction goals. In LEED-EBOM, a project must reduce water use 20% below the LEED baseline. What does that mean? In an older building, the easiest way to meet this requirement is to change the toilet and sink fixtures.

At current water rates in most metropolitan areas, this type of investment would typically pay off within a few years, since future water savings would more than pay for the costs of the upgrade. LEED-EBOM allocates points among various water-use issues, including water metering, indoor plumbing, landscaping and cooling tower water management. Most projects should be able to obtain between five and seven of the 14 available points with minimal investment, so anyone interested in LEED certification for existing properties should definitely consider the water-efficiency capital investment.

Water Efficiency vs. Water Conservation

Many water experts distinguish between water efficient devices and systems, which reduce the water use per activity, and water conservation, which reduces total water usage.

Efficiency versus conservation is an important distinction because people incorrectly use the terms interchangeably. In the LEED [rating system], for example, the term that’s used is “water efficiency” not “water conservation” because it’s about designing green buildings and, among other things, efficiency is what you design into those buildings. Water conservation comes about through educating users and the individual’s development of new habits. Efficiency can be designed into the building but conservation must be achieved through human consciousness and practice.

Conclusion

Water is now a significant “green” focus area. Retail operators and shopping center developers must find ways to cut water use, especially in food service and sanitary facilities as these aspects of the retail environment use a large amount of water. Green-building certifications now require a minimum of 20% water savings vs. code. Water conservation is good business, in a variety of dimensions, and the investment to achieve LEED certification will be offset by savings in the costs of the municipal water supply.

If you are a building developer, owner or manager it is in your best financial interest, as well as the interests of the general population and the environment, to retrofit or specify water saving technologies into all projects as a matter of course.

Condensed and edited from: http://www.icsc.org/srch/rsrch/researchquarterly/current/rr2010173/GreenWater.pdf

Highlights from the presentation follow:

Relating to 2010 tax filing:

• If you claim itemized deductions you will need to wait until February 14, 2011 to file, as the IRS needs time to program system to accommodate new tax laws.
• The Federal filing deadline is extended until April 18, 2011
• The Massachusetts filing deadline is April 19, 2011

Relating to 2011 tax filing:

• Individuals’ taxable income will continue to be subject to the 10, 15, 25, 28, 33 and 35 percent tax rates through 2012.
• The expanded 15 percent bracket for married joint filers, to provide marriage penalty relief, is extended through 2012.
• The 0 and 15 percent maximum rates have been extended on capital gains.
• Annuities and high quality, dividend paying stocks continue to be a recommended investment strategy to minimize taxes.
• The employee’s FICA portion of the Social Security taxes has been reduced from 6.2 to 4.2 percent for 2011 wages (2011 only).
• The annual gift tax exclusion per person remains at $13,000 in 2011.
• The Child Tax Credit has been extended, at $1000.00, through 2012.
• Energy credits, for windows, skylights, and doors that meet Energy Star standards, as well as efficiency standards for furnaces, boilers and stoves has been set at 10% up to a maximum of $500.00.
• The American Opportunity Tax Credit (AOTC) has been extended for higher education expenses, at the rate of $2500.00 per student for four years, through 2012.
• 100% of 2010 unemployment benefits are now taxed, unlike in 2009 when the first $2400.00 was tax-free.
• Elementary and Secondary school teacher expenses continue to be deductible through 2011 ($250.00 above the line deduction for certain expenses).
• Certain hiring incentives and heath care tax credits exist for business – check the tax code to ascertain if your business qualifies.
• The standard mileage rate in 2011 is 51 cents.
• The maximum deferred amounts for a 401(k) or Roth 401(k) plan is $16,500 in both 2010 and 2011. The “catch-up” amount for employees over age 50 is $5,500.00.
• IRA and Roth IRA contributions are limited to $5000.00 or taxable compensation for the year. $6000.00 if you are age 50 (or older) before 2011.

New IRS Audits of Businesses:

Areas of scrutiny include worker classification (employee vs. independent contractor), executive compensation fringe benefits (executive and employee perks) and Form 941 and Form W-2/1099 for withholding and next day deposit requirements.

Areas that may Red Flag Your Return for an Audit:

• Failure to report all your income (match 1099s)
• Claiming (first/long time) home buyer tax credit
• Claiming “large” charitable donations
• Home office deduction
• Business meals, travel and entertainment
• Taking higher than average deductions
• Taking deductions with estimated round numbers
• Claiming 100% business use of vehicle
• Claiming losses for hobby activities
• Cash businesses (taxi service, car wash, bars and restaurants, hair salons, etc.)
• Failure to report foreign bank accounts
• Engaging in currency transactions
• Math errors

There are changes in the 2011 tax code that it pays to employ during the year – whether you are a business owner or simply filing a personal return.

The information presented above is intended to heighten awareness of the tax code changes and inherent responsibilities. As each business and individual’s financiall situation is different, and therefore their tax implications are varied, please be sure to thoroughly investigate the tax code before calculating your taxes or, hire a qualified taxation expert to complete and file your return.

]]> http://www.ipsre.com/blog/strategies-to-minimize-taxes-in-2011/feed/ 0 http://www.ipsre.com/blog/new-or-new-to-you/ http://www.ipsre.com/blog/new-or-new-to-you/#comments Mon, 31 Jan 2011 15:13:45 +0000 IPS http://www.ipsre.com/blog/?p=87 The economy has hit us all hard – in our savings, salaries and ability to purchase necessary or desired items. In the face of this, many have found that buying goods that are slightly used, but of high quality, is the solution to this financial conundrum.

Growth in Reselling Donations

Even in this slow economy, businesses that sell slightly used goods are expanding rapidly. Recently, the Salvation Army opened a new Family Store in Framingham, Massachusetts located at 215 Worcester Road or, if you will, Route 9. Household items, electronics, clothing, furniture and even jewelry are available to the discerning shopper at discount prices. Many of these items are new…or essentially so and from high-end manufacturers.

The economy has taught many of us to be careful and thrifty shoppers. If value is the first priority in a purchase, a used item may be a better selection than a new one – at a similar price point. For example, a lower quality item that may not wear well may very likely cost the same as a high quality item that has had minimal use and will be useful over a long period of time. The choice is a personal one – but as the mushrooming number of shops selling used goods indicates – many of us are making that choice.

It can be predicted that as the economy recovers further, many will continue this new-found manner of selecting merchandise – not only to save money or to acquire products that are unaffordable when new, but also as it is a wonderfully green practice. The reuse of all these products lessens landfill requirements by recycling many items that otherwise would have been discarded. Beyond the green advantage, in the case of the Salvation Army, all proceeds benefit their Adult Rehabilitation Centers, and as such, it makes shopping at the Family Store a socially beneficial activity! (As if we needed an excuse!)

Used Car Sales Increasing, too…

”Although new car sales have been on the continual decline for the last six months or so, used car sales have actually seen an increase over the same period. Even during the month of January – when some automakers experience more than a 50 percent drop off in new car sales – used car sales were up an impressive 10 percent. As you might expect, the jump in used car sales is directly linked to the weakening economy. Used cars offer thousands in savings without much of a downside, leading many buyers to skip the new car showroom in favor of used car lots”, writes Drew Johnson for Left Lane News. (http://www.leftlanenews.com/used-car-sales-increase-as-economic-outlook-worsens.html)

Clearly, used car sales have increased dramatically as consumers decide to pick up the vehicle they crave at substantial savings over the “brand new” price. Does anyone really like that “new car smell”? If you do, just know that it costs about ten grand, anyway!

Some Value Oriented Retailers are Also Expanding

Retailers such as Walmart and Stop and Shop are reporting increased earnings and are experiencing upsurges in sales due to the cost effectiveness of their products compared to similar items at mall stores. Target and CVS, as well as other retailers, are expanding their grocery lines to invite their public to shop in their stores more often – thus, it is hoped, equaling an increase in sales and reported earnings.

Conclusion

Whatever your economic status, if you are interested in maximizing the return on your spending, look into the idea of purchasing slightly used goods. You will be in good company!

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