Category: Tenant Representation

In commercial real estate, you don’t often get an opportunity to create, much less lead, a last-minute game-winning drive. This is exactly what makes Tenant Broker Ted Schwartz a true asset to his clients — most recently, Orthopedic Surgeon Dr. Vincent Boswell.

Dr. Boswell, under poor advisement, had selected a new space for his practice and was in the process of reviewing the corresponding lease which was only days away from execution. His attorney, having recognized his lack of enthusiasm and overall dissatisfaction with his current situation, recommended that Dr. Boswell hire another broker to redirect the relocation process.

Given that the client’s current lease was expiring in just a few months, Ted got busy at work. Within two weeks on the assignment, he identified a viable location that met all of Dr. Boswell’s requirements; the main ones: close proximity to the practice’s current patient base and the doctor’s residence. The new deal resulted in a seven-year lease with a healthy tenant improvement and concessions package, and most importantly a reasonable lease guarantee provision.

Deal Highlights:

• Prime South Buckhead location just steps away from Piedmont Hospital (1776 Peachtree St NW, Atlanta)
• 2,673 SF lease; 7-year term
• Converted free rent into extra tenant improvement to lower tenant’s out of pocket costs

For many businesses, it is a practical decision to involve attorneys in important considerations. Regardless of size or specialty, medical practices require a knowledgeable real estate attorney just as much as they need a good accountant. While it may be tempting (and economically appealing) to attempt to handle real estate matters yourself, each advisor possesses a valuable skill set. A good attorney will ask questions you haven’t considered, tailor documents to reflect the negotiated business terms, and provide guidance and overall risk management. 

What Kind of Attorney Does My Practice Need?

While it is not necessary to use a real estate attorney who specializes in medical real estate, some real estate issues are specific to medical practices. Hiring an attorney who has experience with medical clients help you more than hiring one without this expertise.

For example, a real estate attorney who specializes in medical property will know that leases for medical space need to contemplate the following issues, among others:

• Leasing provisions should have flexibility to add/replace physicians without landlord’s approval
• Regulatory requirements such as Stark Law that are unique to medical practices
• Use provisions need to be broad enough to allow the equipment within leased premises
• Limitations should be included to effectuate a release of professional guarantors who retire or become disabled
• Contingency of lease obligations upon licensure required to operate the business
• Transfer and assignment due to sale of the practice without triggering default provisions

A real estate attorney is particularly important for medical practices wanting to purchase and/or build their own facilities. Your attorney should review zoning and land-use restrictions before you purchase a property in order to confirm that you would be permitted to practice medicine from that location.

Additionally, parking and access considerations are vitally important to the health of the practice.

Finding an Attorney

The selection process is not unlike finding a medical provider. A great first step in identifying a potential legal advisor is through your peer or colleague network for referrals. Most legal professionals would be glad to set up an initial call or meeting for a reasonable charge and sometimes free of charge.

Before making a decision, inquire about the following:

• How many medical practices they have represented in connection with real estate issues?
• Their area of experience (medical group, landlords, etc.)
• Their experience in representing medical groups in non real estate transactions, including general medical group issues

Take the opportunity during this phase to clearly understand the economic expectations: the attorney’s hourly rate, who will do the work, how billing will be handled, and whether you may be required to provide a retainer if the attorney should incur significant out-of-pocket costs.

How to Use Your Real Estate Attorney

In most cases, you’ll be consulting your real estate attorney for issues of real estate law that deal with leasing. But don’t hesitate to contact your attorney for matters relating to buying, selling or financing property, or litigation that arises out of real estate issues, such as a dispute over rights to land.

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The goal for most tenants is to minimize the cost of office space (get the best value and obtain the best space that still works the defined budget parameters). To achieve this goal, it helps to understand the drivers of such costs before you can manage them. Your chances for success in this effort will be improved greatly by seeking expert assistance.  

If a tenant does not succeed in achieving maximum value, it is most likely related to one or more of the factors (below) not being properly addressed. Here are some key factors that impact the total cost of your office space:

•  Selected location
•  Negotiations and lease structure
•  Square footage occupied and specific layout

Let’s review these items in greater detail.

When addressing the location, the first requirement is to undertake a thorough review of the market and adequately identify all potential locations that may match the key needs of your firm, including but not limited to the following elements:

•   adequate employee work space and scalability
•   Image, brand and customer experience
•   employee and client access and convenience

This should always be done even if you are strongly considering a renewal in your current location.

The comprehensive market search would uncover hidden opportunities including spaces not officially marketed or available and subleases. When you have this type of insight you’re better able to create leverage and create a true competition for your business. While owners may have specific circumstances, all strive to lease space at the maximum current market conditions will bear.

The objective of course, is to negotiate favorable financial terms which should be based on current market conditions. Unlike retail shopping, in commercial real estate must be structured with an effective negotiation strategy. Today, landlords are more flexible with terms and aggressive leasing packages to not only attract tenants but retain the ones they have. However, the proper timing and approach is needed to take full advantage of market conditions and creating leverage in lease negotiations.
The potentially most challenging factor address is the actual layout of the space. Specifically, maintaining cost control over the design and construction process is critical. The efficiency of your office space and the cost associated with its build out will be a major contributor to your occupancy costs. It is understood that many companies are increasingly focusing space utilization with a goal of doing more with less. Securing the proper volume of office space through efficient design, space standards and construction management can yield significant cost savings.

Who’s got your back? 

In making the best real estate decision, there are several key professionals that are dedicated helping you identify, negotiate, and design the office space that best serves your financial and operational objectives.

The first is a commercial real estate broker / tenant advisor that has expertise in the product type, market or industry. In creating a truly beneficial layout it’s good to have an architect or space planner to help provide thoughtful insight on how best to use space and still satisfy key requirements. It probably should not go without saying that you should always have legal counsel experienced in real estate to assist with understanding and negotiation of the complexities of the lease agreement.

Engaging a team of experienced professionals who work together with common focus on your best interests will insure the best possible outcome in addressing the office occupancy solution.

President of Atlanta-based Ackerman & Co., Kris Miller sets the strategic direction for the firm’s investment, management and leasing initiatives. Miller joined the firm in 1996, and during his tenure, Ackerman & Co. has experienced significant growth and has solidified its reputation as one of the most prominent real estate firms in the Southeastern United States.

In this Four on Friday, Hartman Simons got a chance to chat with Miller about the state of the Atlanta commercial real estate market and his career in the industry.

Give us a brief overview of the services offered by Ackerman & Co.

Ackerman is a full-service commercial real estate company. We represent tenants seeking space, landlords renting space, and manage owned and third-party space. We also buy, sell and develop commercial real estate properties.

What is your take on how the Atlanta commercial real estate market has recovered from the Great Recession? 

The recovery of the Atlanta commercial real estate market from the recession of 2008 has been gradual. Positive absorption of industrial space began in 2011, followed by the positive absorption of office space a year later. In both cases, those markets had endured net negative absorption for a longer period than any time in Atlanta’s history. The recovery now seems to be gaining momentum and spreading from the submarkets where it began to a metro-wide phenomenon.

What is it about commercial real estate that makes it such a satisfying career for you?

Commercial real estate is satisfying because the effort of your labor is tangible: you can touch it, see it, visit it, and explain to friends and colleagues what you do for a living.

If you could give one piece of advice to someone just beginning his or her commercial real estate career, what would it be?

Get experience as a tenant broker. All the value in commercial real estate is created when a broker brings a tenant to a landlord and a lease is signed. The better you understand this process, the more successful you will be in this business.

Leasing space is an important decision and use of resources. It’s often the lifeblood of your business – especially if you’re seeing patients or clients. There are myriad factors in determining where to lease and of course, what you’ll pay. However, it has gotten more complex in today’s environment.

Here are some considerations in approaching the leasing process:

• Know your Landlord. You need to understand who your Landlord is and what financial condition they are in. Today many properties are lender owned or involve owners with limited capital. Most brokers have excellent knowledge and data and can help navigate to save value time and hassle.

• Seize the day. It’s still a Tenant’s market in most areas so, it may be a good time to extend leases or expand while extracting maximum value from Landlords. Opportunities can change quickly submarkets with less space and minimal new development.
• Seek professional assistance. Landlords possess market insight and negotiate leases regularly. Engage a broker that specializes in representing Tenants so you can level the playing field and as well as a knowledgeable attorney help in the lease review.
• Protect your leasing rights. During negotiation you should consider requesting a subordination non-disturbance and attornment agreement (SNDA) which would require that existing lenders that sign it honor your lease in the event of foeclosure
• Get the 411 on subleasing. Sure you can get a great deal on a sublease however, you are subject to the rights of the original tenant. Negotiate with the Landlord to recognize your lease so in the event of that Tenant’s default your lease may still be honored
• Help yourself. In your negotiation you may want to request ‘set off rights’ to allow for the tenant to make repairs and pay costs if Landlord doesn’t and deduct these expenses from the rent.
• And the big one: decide to own or to lease. Consider buying space if it works for your business – have cash, stability and an understanding of future space needs. Today, Lenders like buyers that plan to occupy the space. With new lease accounting changes it may make sense to have the property as an asset.

The Goddard School, one of the most prestigious early childhood education and childcare learning centers in the U.S., was seeking an intown Atlanta location for one of their franchisees, Learning and Beyond. Adding to the challenge of an intown location were the requirements of an 8,000 – 10,000-square-foot space with a 5,000-square-foot playground.

Seasoned tenant rep brokers Ted Schwartz and Shea Meddin got to work quickly, performing an extensive market search that resulted in a few viable options. The winning choice, while perfectly suited to meet the client’s needs, was already leased. However, since the tenant was in default, the Ackerman duo carefully navigated the deal to where Goddard could replace the defaulting tenant and sign a long-term lease.

The one-of-a-kind deal resulted in:

• Prime Midtown Atlanta free-standing location (12th & Spring Street).
• 8,000 square feet on 2 levels, covering 0.6 acres.
• Great rental rate and above market concessions (sufficient for client to reach enrollment capacity before rent begins).
• Creative parking structure to accommodate parent and employee parking.