Taking sides

In this age of corporate governance, it’s
vital to know who’s representing you in
every major transaction of your business. Even when there are no legal implications, it never hurts to take stock of
who’s working for you and your best interests.

Matthew Feeney, Managing Principal
with CresaPartners in Philadelphia, encourages business owners in the market
for commercial space to weigh their
options when seeking representation.
“Most firms in any market are full-service
real estate companies. In larger markets
there are firms that just represent tenants.
The differences may not be apparent to a
tenant, but they can be very important.”

Smart Business spoke to Feeney about
the principles behind a brokerage firm that
focuses on the tenant.

Why might a firm choose to represent just the
tenant?

In our case, we were founded by former
corporate real estate executives who saw
the value in having a firm just represent
their interests. In addition, we realized that
most firms are not large enough to have an
internal real estate group and saw that we
could fill that void on an as-needed basis. A
firm that represents the tenant is more able
to dedicate its resources to servicing the
needs of the tenant exclusively and eliminate conflicts of interest.

What should someone know about working
with a ‘full-service’ firm?

If you are representing owners of real
estate, they will have certain demands on
your time. In addition to marketing the
space and attending space showings you
will also be responsible for layers of reporting on the activity in the market as well as
developing proposals when requested. I
have heard from those that perform this
function that this is very time consuming.
The more time you spend performing this
role, the less time you have to spend servicing the needs of the tenant. In many full-service firms the agents have decided to
either only represent buildings, or only represent tenants. While this may reduce the
potential for a conflict, the fact remains
that the agents still do work for the same
firm. That’s one obvious conflict, but
beyond this is the fact that representing
buildings versus tenants really is two different skill sets. The building agent is selling a product, while representing a tenant
really involves selling a service.

Why choose sides?

People have started to wake up to who is
really representing them in a transaction
and where their interests lie. Some of this
has been brought into focus by the residential market, where they now have to
disclose that they’re either a seller’s agent
or a buyer’s agent or in some cases a dual
agent.

On top of this we have had some corporate malfeasance in the past couple of
years, and people have started to look for
full disclosure on financial reporting and
business practices. These events provided
the impetus for Sarbanes-Oxley and have
raised the level of awareness as to who’s
watching the store and who’s representing
whom in a process. All of these factors
have led firms to examine whom they wish to represent in a real estate transaction.

What are some of the major differences in
working with a ‘full-service’ firm versus a
firm that only represents the tenant?

The sell for someone who represents
both landlords and tenants would be that
they have access to all the information.
Because they represent both buildings and
tenants, they see all the deals that are running through those properties, and they —
because they represent owners — know
where owners are going to be willing to cut
their deals. But because a tenant-only firm
doesn’t represent buildings or owners,
they’re able to represent all the alternatives
in the market without any bias. A tenant
firm can push the landlord for better terms
and can be objective about the property
without any concern about alienating an
owner who might be a potential customer.

We also find that specialists have the time
and expertise in the planning process to
ensure that clients are not only getting a
good deal, they’re getting the right deal.
Those are two different things. A $20-a-square-foot deal in the wrong location or
for a space that doesn’t meet your business
needs isn’t a good real estate transaction. A
$22-a-square-foot deal in the right location
with the flexibility to meet your business
needs is a solution, not a deal.

What should a business owner think about
when hiring a representative?

These are major decisions for most companies and you need to be sure that the
firm you have chosen has your complete
trust. Secondly, it helps to understand who
from that firm will actually work on your
project and whether or not they have the
experience needed to complete it successfully. Finally, you are going to be spending
a fair amount of time with whomever you
hire. I would make sure that the chemistry
is there for the team to work together. It
can be a nine- to 12-month process and it
sure is better if you can have some fun
going through it.

MATTHEW FEENEY is Managing Principal with CresaPartners
in Philadelphia. Reach him at (610) 825-2159 or mfeeney@
cresapartners.com.