Posted by: BayAreaComRE | May 21, 2010

Guest Post: National Cushman & Wakefield Tenant Rep Conference in Washington D.C.

Ken Ashley runs a blog called the Commercial Tenant Resource focused on commercial space users in all United States markets. Here are his highlights straight from the conference in Washington D.C.

TREP (Tenant Representative) is a conference of some of the highest producing brokers with Cushman & Wakefield in the US. The conference consists of 65 brokers from the Firm and senior C&W Management including Americas CEO John Santora,  Client Solutions head Bruce Ficke and Mid-Atlantic Region head Jim Underhill.

Here are a few highlights from the conference:

  • Big volume of continued outsourcing to brokerage houses by corporate directors of real estate.  Corporations are increasing the amount of what they outsource and actively reevaluating their service providers.
  • Federal Government expected to lease 12 million square feet in DC and Northern Virginia in the next year. A stunning stat that is indicative of how fast our government is growing.
  • DC is hot, hot, hot. Like it or not, according to local DC brokers, for many reasons corporate America is coming to this City.
  • Tenant leasing activity is way up and concessions are the best in memory.
  • The verticals of technology and biotech are especially hot and seem to be growing.
  • An amazing comp from a large law firm in New York: 400,000 s.f. rates starting out at less than $80 per foot and escalating every 5 years ending up at $102 per foot. 11 months free and $65 million in TI  ($160 PSF) with a $35 million ($87 PSF) payment in lease pick up.  This is in a relatively new building hoping to achieve rates of $130-150 PSF 2 years ago.
  • New York is on fire as well. Hearing about some very large assignments that our brokers have in the City. Corporate America is clearly recognizing the opportunity that is available in the market today.

Jeff DeBoer, President and CEO, Real Estate Roundtable

  • Our industry is at war; we need to get our act together. We need to act as an cohesively as an industry or Congress will pick us apart. Now is the time to up the ante and participate.
  • Call Members of Congress and let them know how you feel.  They are very isolated now, and spend their days huddled with staff or voting. They have very long days. At night, they see lobbyist. Very little engagement with US Citizens; they need to hear about real life and real issues with the real estate industry.
  • Member of Congress DO call Jeff and ask how they can help real estate. Many are very concerned including Bob Menendez from NJ, Kent Conradfrom North Dakota, and John Kerry from Massachusetts.
  • Since real estate is everywhere, we are no where. There is no “senator from real estate” like many other industries.
  • The “carried interest” bill will double the takes on certain gains in real estate. Today the rate is 15%. If the bill passes, the rate goes to 32% and then to 38% plus a 3.8% Medicaid tax.
  • We are at war as an industry. There is a continuing battle to increase the taxes on capital gains in real estate. Risk takers and capitalists are being penalized with more and more taxes.
  • Values are down 30-50% from their highs nationwide.
  • In order to get the system going again, we need substantial amounts of equity. We are facing a liquidity crisis. There is a lot of equity ready to “play” but it does not equal the $1.2 Trillion in CRE debt that is in the process of maturing.
  • Security: The Roundtable is assembling a list of all major US Assets and their true owners and managers. This well help with Federal Government make contact with ownership in times of crisis. Also, Roundtable is actively advising owners about security best practices.

Patrick Connell, CW Capital discussing the receivers role (receivership 101):

  • A receiver is an  independent fiduciary represents the court not the owner or lender.
  • The receiver has 3 years after foreclosure to position the asset but this can be extended.
  • Agreements for receivership can be challenging and sometimes can take up to 9 months to negotiate.
  • Receivers put in new accounting systems and scrub the financials. They notify the tenants and actively manage the asset. When ready, they get the asset to market.
  • Receivership is an action normally take by the lender and the receiver functions as a powerful asset manager. This role also includes interaction with the court which adds complexity. Receivers spend ALOT of time in Court.
  • It there is a good transaction for the asset there is a way to get it done. Tenants likely will not have direct access to special servicers for liability reasons.
  • Future of the special servicing business: CW Capital 1 year ago 7.5 Billion, today 17.5 Billion. “We are in the third inning of an extra innings ball game.”
  • Know that there is a process here – it simply takes time

Doug OlsonMonument Realty, discussing the marketing of distressed assets:

  • Monument Realty is a local developer. When Lehman Brothers went belly up, they dragged 27 of Monument’s projects into bankruptcy (“BK”).
  • Doug says he is here because of his real life experience with BK.
  • All of the assets Lehman assets were ground up development and were subject to a construction loan funding TI and commissions. Question to ask: “What is the lenders obligation to fund TI’s and commissions?”
  • Ask to see the leasing guidelines attached to the loan although admittedly hard to get.
  • Building value is torpedoed. Many times the sponsor hangs on for pride and fees.
  • Balance sheet notes are not trading despite the cocktail party chatter.
  • In the end, the lender wants to do the deal so keep pressing. This is an exercise in truthfulness.
  • Go pull the deed of trust on a candidate building and try and determine what the debt is. Make some assumptions based on the market and you can calculate a potential NOI.
  • Mez debt: Determine who the mez lender is because there are lots of companies that aren’t really in the business of lending. Must determine their intent, as they can become predatory and own the real estate.
  • Reputation of sponsors is important to them. If they are in the local market, and they tell you they will do something and don’t then they know they know that tenant reps will talk. Also impacts the building on the same level. Bad rap, no deals.
  • There is so much debt coming due, that you really need to try and find out when debt on a specific building is expiring.

Robert Weinstock, Pillsbury Winthrop, discussing tenants rights and obligations:

  • We’ve always had to worry about landlord instability and while issues are more acute in the current environment, they aren’t new.
  • Key issues: make sure tenant gets concession package and get the broker paid (Ed note: Thanks!)
  • Lease is both a contract and an interest in land. It has priority over some rights, but subordinate to others. The mortgage is most likely in priority to the lease because it was likely recorded before the lease.
  • SNDA is the way to address the subordination of tenant rights.
  • Tenant brokers should ask “where’s the money?” In other words, where is the cash coming from to fund TI and commissions.
  • Ask landlord to escrow it’s portion of the funding, but this is not a perfect remedy. In BK the funds can be swept up. Some tenants try to get a security interest in the escrow, but most lenders wont agree.
  • One can also contract with the landlord to do the work and provide for a termination option if the landlord doesn’t deliver.
  • Very few BK’s by commercial landlords in part because many buildings are single purpose entities and the BK doesn’t accomplish much.
  • A foreclosure is where you have secured debt and the holder of the mortgage or deed of trust has right to take title to the real estate. This is a sale of the asset.
  • In a receivership, the lender is not taking title.
  • A bankruptcy judge and code trumps just about everything, no matter what the lease says.
  • Comments from Lou Christopher- Offset is not acceptable because our clients are not the bank. We require SNDA (not best efforts but the document with rep that future SNDA’s will be substantially similar). Ask for a  letter from lender saying they have the funds, ask who your principals are, and ask the landlord to confirm who their lender is. The basic premise is that a lender will not commit fraud in a letter representing the cash situation.
  • Consider a lease deal like a building purchase deal. You must complete due diligence.


  1. ‘Great achievement’ to be in World Cup mix – Hodgson

    Agen Bola terpercaya reported – Roy Hodgson feels that it is “a great achievement” for England just to have qualified for World Cup 2014.
    The Three Lions overcame the likes of Poland and Ukraine to finish top of their qualifying group and will be among the European contingent in Pot Four for Friday’s group stage draw.
    Hodgson enthused to Sky Sports News: “It’s such a great achievement to be here. That was our goal; that was our aim.
    “We had to work very hard in our group with 10 tough qualification games and, all along, there was a carrot at the end of it that we were looking to enjoy and that was, of course, being in the final tournament.
    “This really just brings it all home that all the hard work has led to this and we can’t wait to see who we get.
    “We respect everybody; we don’t fear anybody as such. Whatever group we get, we think it will be a tough one but we’re just happy to be there in a group and playing whatever opponents the draw pulls out for us,” Morata laughs off Real Madrid exit rumours

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