Jerry Roche

Wednesday, 29 March 2006 09:46

Customer service metrics

British statesman Benjamin Disraeli once said, “There are three kinds of lies: lies, damned lies and statistics.”

InfoCision’s Steve Boyazis respectfully disagrees. Boyazis believes that you can glean plenty of good customer-care information from statistics — providing you know what you’re looking for, and providing you can get apples-to-apples statistics.

“But you have to dig deeper into the numbers,” Boyazis says. “Just looking at whatever numbers your call center provides doesn’t lead to satisfied customers.”

Boyazis is senior vice president for business development at InfoCision, which provides teleservices to corporate America. In an exclusive interview with Smart Business, here’s more of what he said.

What are the most important statistics when judging the effectiveness of call center operations?
The two or three basics that people think of when they think of customer care in call centers are: (1) How fast is my call answered? (2) How long are people on hold? and (3) How many callers abandon the call before being serviced?

For instance, are 80 percent of your calls answered in 20 seconds or less? Are less than 5 percent of your calls abandoned? The longer people are on hold, the more likely they are to hang up. If they call to order something and they’re put on hold, they get frustrated or change their minds. If they call to complain, they just simmer and get angrier.

Of course, it depends on the business or industry you’re talking about, but generally 20 to 30 seconds is acceptable as a wait time. When you start getting up near five minutes, that’s when people start getting frustrated.

What are some of the nuances behind those numbers?
You have to find out what’s driving the numbers, and you also have to determine what each customer is worth.

For instance, we recently ran a test with a client interested in ‘save’ calls. Those are callers who are calling to downgrade or stop a service. The company felt its current vendor was doing a pretty good job. It had a 3 percent abandonment rate, a wait time of 2.5 minutes, and it dispositioned 37 percent of the calls as ‘savable.’

We were able to improve the wait time to 20 seconds, which led to the abandon rate decreasing to 1 percent. And — because our agents better understood the customers, their needs, and what levers we could pull on behalf of the service provider to ensure customer satisfaction — we identified almost 43 percent of the calls as savable.

What does that mean? That’s where the ‘nuances’ come in.

Let’s say the opportunity is 100,000 phone calls. With 2 percent fewer abandons, that means you have 2,000 more opportunities to talk to customers. With 6 percent more dispositioned ‘savables,’ that means 6,000 additional opportunities. If both companies saved 1/3 of their potentials, we’d save 2,600 more clients than the competitor, which simply defines their key customer service metrics by wait times and abandons.

But it even goes a little deeper. To really decide how aggressively you want to save customers, you need to understand their lifetime value and build an ROI (return on investment). For instance, if the value of the customer is $500 and you just paid $30 for a customer acquisition, that’s a fantastic return. If the value of that same customer is just $20, then the effort isn’t worth it.

Are those kinds of numbers fairly typical?
The customer service numbers are industry standard. But you really have to start by understanding them at the front end: why the customers are calling, what they need, what you can do to fix them. And you’ve got to identify as many of those people as humanly possible that are savable. Then, by applying the lifetime value of that customer, it’s easy to put together an ROI on every customer who’s a candidate.

What about customer service minimums?
There are several ways to handle calls. One is scripted with few options, for frequent, well documented programs. Another is the more complex relationship-building call, where you have to understand the customer and what he or she needs to be saved and what’s going to work for that particular customer.

What are other factors determining level of service?
Volume is one. Different call centers are set up to handle different volumes. In order to be able to train people to a certain level, you have to have enough critical mass.

Another is language. Customer care provided by folks with different language skill sets has an affect on the ROI. If you go offshore, the cost is much lower; if you choose a domestic provider, you get a better customer experience with agents who speak the same language as the caller.

STEVE BOYAZIS is senior vice president for business development for InfoCision, Inc. Reach him at (330) 668-1400 or

Monday, 26 January 2009 19:00

Evaluating exposure

Evaluating your company’s insurance coverage is a complex process. Many companies have numerous policies, including general liability, directors and officers (D&O) liability, errors and omissions (E&O) liability, and employment practices liability, to name a few. Evaluations should be held at least annually.

“Premiums are not the only issue,” says J. Ronald Ignatuk, a partner in the law firm of Shulman Hodges & Bastian LLP. “Companies change. They may embark on a new enterprise or new line of business that increases not only the potential that they may be sued but the amount of damages sought in the lawsuit. Companies need to regularly evaluate their exposure.”

Smart Business spoke with Ignatuk about the evaluation process and potential insurance issues.

What factors should risk managers consider when evaluating the amount of coverage?

The evaluation process depends upon the nature of the business and the risks presented by offering the goods and/or services to the market. For instance, if a company manufactures all-terrain vehicles, injuries to someone using that product could be severe, and fatalities could result, prompting a substantial product liability lawsuit. For this company, a large amount of indemnity is recommended. Conversely, if a company manufactures envelopes, potential exposure for injuries from use of the product is small and less indemnity is required.

The company’s risk manager should work with insurance brokers, who are the most qualified to advise them regarding the amount of coverage and the potential exposure. The risk manager also can consult with legal counsel, who can be a valuable source of information about lawsuits in similar industries.

With other types of coverage, such and D&O liability coverage, careful analysis should be performed regarding potential exposure of the board and corporate officers. Likewise, with E&O, careful analysis should be performed regarding potential exposure related to the business operations of the company and potential harm that those operations could cause.

What should the risk manager consider when increasing the amount of indemnity?

If it is determined that more indemnity coverage is advisable, then the decision must be made whether to replace the existing policy or purchase an umbrella policy (or increase the limits on an existing umbrella policy) that provides additional indemnity after the first policy’s limits have been exhausted. ‘Stacking’ two or more policies provides additional levels of indemnity.

Umbrella coverage is generally inexpensive compared to the primary underlying policy because it isn’t implicated unless and until the limits of the primary policy are exhausted. However, the umbrella coverage may not contain certain features that may be required. For example, the umbrella policy may only provide indemnity and may not cover other expenses, including defense costs.

When should a company consider switching insurance companies?

While a different company may offer a more attractive premium, that is not the only consideration. The risk manager must also consider the impact of changing carriers.

One important factor is whether the company has already incurred liability for something it has done, which the new insurance company may not cover if a claim is made against the company for that past act. When applying for a new policy, the company must disclose on the application all known claims and known acts and omissions that might give rise to a claim. Any claim arising from these disclosed acts and omissions is excluded from coverage. Thus, if the company is aware of significant potential claims, it may want to keep the existing coverage.

How important is an accurate application?

If the company omits an important fact on the application — even if the omission was inadvertent — and a lawsuit completely unrelated to omitted fact is subsequently filed, the insurance company can, and some will, rescind the entire policy, leaving the company without any insurance. The omitted fact does not need to be related to the lawsuit. As long as the omitted fact is considered ‘material’ to the insurance company’s decision to issue the policy or the amount of premium charged, the insurance company may have the right to rescind the entire policy, thereby avoiding any obligation to defend the unrelated lawsuit or pay any judgment. When changing insurance companies, great care must be taken to disclose everything on the application. D&O and E&O policies are more prone to scrutiny of the application after a claim is made than a general liability policy.

Do insurance companies always engage in good faith claims handling?

Insurance companies generally defend lawsuits and pay judgments when there is little or no dispute regarding coverage. For more complex matters, they usually hire outside counsel to render a coverage opinion. When coverage is questionable, insurance companies may agree to defend and indemnify, and sometimes they do not. In the latter case, the company needs to retain competent counsel experienced in insurance law to press the insurance company to defend the lawsuit.

J. RONALD IGNATUK is a partner in the law firm of Shulman Hodges & Bastian LLP. Reach him at (949) 340-3400 or

Saturday, 26 July 2008 20:00

Background checks

Up to 40 percent of resumes can contain false or exaggerated information, according to popular statistics circulating in the business community. It’s no surprise, then, that so many employers want to ensure that what they are getting in an employee is what they are promised.

Over the years, however, laws that govern background checks have evolved into a legal morass. Federal and state agencies have issued guidelines that also apply to background checks. The Equal Employment Opportunity Commission (EEOC) has issued selection guidelines, and the laws that apply include the Fair Credit Reporting Act (FCRA) and — in Pennsylvania — the Criminal History Record Information Act (CHRI), the Child Protective Services Act and the Older Adult Protective Services Act.

“It’s kind of a maze that employers have to navigate because a lot of federal and state laws can come into play,” says attorney Sheri Giger, an associate with Jackson Lewis LLP. “It’s not a simple topic.”

Smart Business talked to Giger about how companies should approach background checks on potential employees.

What areas can an employer legally check?

Depending on the job, an employer can request an applicant’s criminal records, plus verify education, prior employment and credit reports. The people you have doing the checking just have to work within legal parameters. A background check could include a credit report. Some employers do it as a matter of course, while some just do it for particular positions because of the nature of the job. There are also cost factors to be considered. One of the newer trends is for an employer to ‘Google’ the names of prospective employees on the Internet. If it’s public information, there’s nothing illegal, per se, about referencing that information during applicant screening. However, employers cannot always be sure whether the information they obtain from a Google search is accurate, particularly regarding an applicant with a very common last name.

What laws come into play?

When conducting background checks, an employer first needs to determine whether it’s covered under the federal FCRA. If it uses a third party on its behalf, a ‘consumer reporting agency’ under the FCRA, the employer is required to obtain consent for a background check. If the background check reveals anything that could lead to an adverse employment decision, then the employer has to disclose that information to the applicant as well as meet additional notice requirements.

If there is not a third-party consumer reporting agency conducting the background check, the employer still has to be aware of state laws that may regulate the process. In Pennsylvania, the CHRI states that an employer can only consider felony and misdemeanor convictions from a background check. If such convictions exist, the employer can consider them only to the extent that they relate to the job for which the person is applying. The CHRI requires employers to notify applicants in writing that the reason they are not being hired is based in whole or in part on their criminal history. Another wrinkle in Pennsylvania is that the Human Relations Commission pre-employment inquiry guidelines do not allow an employer to consider misdemeanor convictions, which the CHRI permits in certain circumstances.

The EEOC also comes into play. Under its guidelines, you can’t make personnel decisions on the basis of arrest records that don’t involve subsequent convictions. Generally speaking, employers simply should not consider arrest records. The EEOC guidelines are similar to the CHRI because a conviction can be considered only if there’s a relationship between the conviction and the applicant’s fitness for a particular position. But the EEOC requires employers to look at other factors related to the situation, such as when an offense took place, its seriousness and whether rehabilitation has been involved.

Also, if you’re an employer in a particular industry, there may be other state-mandated background check requirements. For instance, if you’re involved in the care of children, you likely have to comply with the Child Protective Services Act. If you’re an employer that deals with the older population, there’s a statute in Pennsylvania called the Older Adult Protective Services Act that may apply. Both contain a laundry list of criminal offenses (including different levels of misdemeanors) for which an applicant is not permitted a job if previously convicted. It’s a heightened requirement, and it’s industry-specific.

Is there anything that an employer should not check or question?

Any protected characteristic such as religious background, whether the applicant has a disability, national origin or ancestry and family status shouldn’t be considered in making an employment decision, because the employer may run the risk of facing a failure-to-hire discrimination charge based on a protected characteristic. Both the EEOC and Pennsylvania Human Relations Commission list a host of questions that you’re not permitted to ask an applicant. If an employer falls under the federal Fair Credit Reporting Act, there are certain protections for both the employer and the employee. If, for instance, employers receive information that raises eyebrows during a background check, they are required to ask the applicant about it, because it may have been misreported and thus inaccurate. On the flip side, the FCRA allows an applicant to know that some incorrect personal information might be circulating. In that case, the applicant has the opportunity to correct the information.

SHERI GIGER is an associate with Jackson Lewis LLP. Reach her at (412) 232-1983 or

Saturday, 26 July 2008 20:00

Your reclamation rights

Many creditors in the 1.5 million bankruptcies filed each year are sophisticated and familiar with the bankruptcy claims process. But if they do no more than file their proof of claim, they may be missing out on valuable rights.

“A lot of businesses hear the word ‘bankruptcy’ in connection with one of their customers, put up their arms and give up,” says Mark Bradshaw, a partner in the Insolvency and Reorganization Practice at Shulman Hodges & Bastian LLP. “They often do not realize that one of the arrows in their quiver is the ability to exercise reclamation rights.”

In October 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) became effective. BAPCPA expanded and clarified reclamation, theoretically making recovery of goods easier. According to Bradshaw, the BAPCPA (which took eight years to finalize) was “the most heavily lobbied piece of legislation in U.S. history” because so many special interests and stakeholders were involved. Though the number of bankruptcy filings declined immediately following its passage, this year they appear to be back up to pre-2005 levels.

“I am definitely seeing an increase and an attitude shift among debtors and trustees,” he says. “Creditors are getting more educated, and reclamation rights are easier to exercise — even though they are still underutilized.”

Smart Business talked to Bradshaw about the reclamation process.

What is the legal definition of ‘reclamation’?

Reclamation rights are governed by Bankruptcy Code Section 546, which applies to all bankruptcy cases, including Chapters 7, 11 and 13. Reclamation is a procedure in a bankruptcy case by which a company can recover from the estate representative goods that have been sold and delivered to the debtor prior to the bankruptcy filing. Under BAPCPA, the creditor still must make a written demand, but it now has essentially 45 days from the date goods were received. If the 45-day period expires after the bankruptcy filing, the vendor is given an additional 20 days to make a demand.

Not many creditors are aware that this option is available, and even fewer are aware that BAPCPA makes it even more accessible.

In what ways has BAPCPA expanded or improved creditors’ rights?

The estate representative — the trustee in a Chapter 7 or a debtor-in-possession in a Chapter 11 — has a lot of power. But if a vendor has properly exercised its reclamation rights, the estate representative is legally bound to cooperate with the vendor to return the product. The reclamation creditor can exercise its rights by making a timely written demand to the debtor asserting its right to reclaim goods. Even though the creditor’s claim may be junior to a lien creditor, such as a lender with a blanket security interest, it is senior to the estate representative.

What limits have been placed on creditors’ rights under the 2005 amendments?

Prior to BAPCPA, there was some confusion or at least uncertainty about how lien creditors were treated. But BAPCPA established an important limitation: If there’s a blanket lien holder, then reclamation rights are still subject to that pre-existing lien. In other words, the reclamation creditor will not jump ahead of a lien creditor that predates the reclamation claim.

If the debtor cannot return goods, what options are available to creditors?

If the reclamation creditor fails to send written notice of reclamation within 45 days or if the goods are no longer in the possession of the debtor, then the alternative is to file an administrative claim. This is covered under Sec. 503(b) of the Bankruptcy Code.

A new subsection of the code grants vendors the right to receive an administrative expense claim for the value of goods delivered within 20 days prior to the debtor’s bankruptcy filing — as long as the goods were sold in the ordinary course of business. Administrative claims have the highest priority, and therefore, they provide creditors with a lot of protection. However, requesting allowance and payment of an administrative claim is more complicated than simply mailing a written reclamation demand to the debtor. A section 503(b) claim is a sophisticated legal document that requires an attorney’s assistance and often a court hearing.

How can you tell that it is a good time to exercise reclamation rights?

A creditor will know if its invoice is not paid when due, but creditors often learn from the debtor itself or fellow vendors that the debtor is having financial trouble. Here, the assistance of an attorney is useful. The attorney can search records to see if there are judgments or pending litigation against the debtor. The attorney can also look at UCC (Uniform Commercial Code) financing statements to see if the debtor’s assets have been pledged to multiple creditors. This is useful to the creditor wanting to reclaim its goods because a lender with an applicable UCC will take priority over reclamation rights. UCC-1s are filed with the secretary of state, so they are a matter of public record. Also available is information about whether the debtor is still in good standing with the state.

If a vendor is providing a substantial amount of goods and/or has concerns about its customer’s ability to pay, that vendor should consult with a bankruptcy attorney to advise how best to protect its rights.

MARK BRADSHAW is a partner in the Insolvency and Reorganization Practice at Shulman Hodges & Bastian LLP. Reach him at (949) 340-3400 or

Saturday, 26 July 2008 20:00

Investment properties

For corporate managers who are looking to increase their personal investment holdings, multihousing units are a solid place to start, says Roger McElroy, Vice President of the Multi-Housing Investment Group in the Dallas office of Grubb & Ellis Company.

“In most cases, you’re not only making money from the operation of the complex, but you’re also concurrently enjoying the appreciation of the asset,” McElroy says. “That’s where a lot of investors make their money. They hold the property for three to five years and then sell. If you buy in the right area and don’t overpay, when you sell it, it has appreciated in value. That’s the second part of the income stream.”

Smart Business talked to McElroy about finding the best multihousing units in which to invest.

What are the advantages of working with a buyer’s representative?

Multihousing buyers typically work with the seller’s representative, whose objective is to sell you that one particular property. But buyer’s representatives have no vested interest in any one particular property; instead, their objective is to find the property that’s best for you.

A good multihousing buyer representative can be particularly helpful to out-of-town buyers. Typically, the buyer’s rep will expose you to a greater number of potential properties. This includes properties listed by one-man and two-men shops that don’t always expose the properties publicly or unlisted properties that are available but not made public.

Buyer’s reps can provide price comparisons and analyze geographic variables and the potential for appreciation. He or she can also share apartment research, which will give you insight on apartment trends, including rents and occupancies. A good buyer’s rep also will arrange showings that accommodate your schedule, help establish your credibility with the seller and prepare a Letter of Intent.

Finally, a buyer’s rep will always try to look ahead and plan an appropriate exit.

What kinds of additional help will a buyer need?

In most cases, a buyer’s rep will try to refer clients to professional services so the transaction is successful. These professional services include, but are not limited to:

  • legal assistance

  • insurance agents

  • a management company that specializes in like properties

  • a mortgage broker who can introduce the buyer to financial institutions

  • construction companies for remodeling and/or renovation

  • other third-party services as required

Are most multihousing buyers local or from out of town?

At least half of the buyers seem to be from out of town, and out-of-town buyers really need local guidance. A lot of folks come to Dallas to buy from the East and West coasts, including Florida and California. In Dallas, they can buy a lot more for their money because we haven’t experienced such sky-high prices. Those potential investors know that Dallas is growing. The metroplex is now the fourth-biggest in the U.S., after New York, Los Angeles and Chicago. You get a lot more for your money in this area.

A good buyer’s rep can take a microscopic look at and analyze submarkets. There are a lot of comparatively minor factors, like areas where public schools are stronger, where crime rates are lower and where appreciation rates are higher. Also the 10 cities that are part of the Dallas metroplex sometimes have different tax rates.

Out-of-town buyers also save a great deal of time by working with one source. A good buyer’s rep will provide you with market sales comparisons and advice on potential acquisitions by analyzing each complex, its geographical location and its potential upside.

How can sales and rent comparisons benefit buyers?

Sales comps are actually sales prices for similar apartment complexes. They are limited to similar transactions within a geographical area near the complex, maybe in the same county, and they include cost-per-foot and cost-per-unit versus other properties that have recently sold.

They allow the buyer to compare each property with a side-by-side analysis. The buyer’s rep is vital to this process, since he or she can share a vast amount of multihousing research, including ALN, CoStar, Real Capital Analytics, MPF and more.

Knowing these numbers beforehand, including net operating income, is a great negotiating tool.

ROGER McELROY is Vice President, Multi-Housing Investment Group, in the Dallas office of Grubb & Ellis Company. He can be reached at (972) 450-3202 or

Wednesday, 25 June 2008 20:00

Finding industrial property

The vacancy rate for commercial/ industrial properties in the Dallas/Fort Worth area is a normal, healthy 9 percent. Even though facilities are plentiful, Gary Lindsey, SIOR, Senior Vice President in the local office of Grubb & Ellis Company, says that businesses seeking new or more space shouldn’t wait until the last minute.

Allowing adequate time for a facility search is critically important. One should allow for the actual touring of properties; narrowing the alternatives; issuing requests for proposals; analyzing the proposals; picking a building; space planning; document negotiation; finishing out of tenant improvements; installation of racking, phone systems / IT and personal property; and, finally, the move itself. Taking one’s eye off the timeline can result in holdover penalties at the old location or, even worse, ineffective negotiations if in a hurry.

In past years there was a tendency for tenants and their representative to focus solely on base rental rate and perhaps some concession. Now a great deal more time is spent negotiating deal points of a lease document, for example, cap controllable operating expenses, options to expand as well as contract, early termination options should things change before expiration, indemnification for environmental conditions, etc.

Smart Business asked Lindsey about key factors that affect a company’s occupancy of industrial real estate properties.

When contemplating a physical move, what should corporate executives consider?

Available trainable labor is always near the top of the list. Most human resource experts interested in opening a new manufacturing facility or distribution warehouse are paying attention to where the labor comes from in relation to the potential sites. Mass transit and car pooling have become much more important with employees spending more of their paycheck on fuel.

Companies today are more focused on total operating costs — meaning taxes, insurance, common-area maintenance, property management and all the ‘moving parts’ that get passed on to the tenant, not to mention the cost of utilities.

Finally, location relative to proximity to the interstate highways is critical due to the high price of diesel fuel. Companies must determine where vendors and suppliers are, as well as where their customers are, in order to cut distance traveled and save transportation costs. You can only pass along price increases to customers for so long before they get to a point where they stop buying.

How important are environmental concerns when selecting (to lease) or designing (to own) industrial properties?

Developers and corporate America alike are trying to figure out ways to save our planet — like installing solar panels, using wind power, installing adequate insulation and collecting rainwater for irrigation purposes.

In the U.S. and other countries around the world, LEED [Leader in Environmental and Energy Design] certification is the recognized standard for minimizing environmental impact. The LEED rating system promotes design and construction practices that increase profitability while reducing the negative environmental impacts of buildings and improving occupant health and well-being.

There are four LEED certification levels — Certified, Silver, Gold and Platinum — that correspond to the number of credits accrued in five categories: sustainable sites, water efficiency, energy and atmosphere, materials and resources, and indoor environmental quality.

Within a year or so, getting LEED certification on industrial buildings is going to be standard. Some places like California (but not Texas — yet) are rewarding owners with tax abatements and tax credits for being LEED certified. They will eventually penalize developers for building to old standards.

LEED certification is really important to most developers, who are hoping that their prospective tenants are of like mind. The 12 percent to 15 percent premium for environmentally friendly buildings can amount to quite a bit of money. Time will tell.

How much lead time should a company allow for selecting and moving into an industrial site?

Some transactions are not complicated at all and can go quickly while others can be painful. Allowing enough time to execute the process is extremely important. You would not believe how many large companies leave just a couple months window to find and occupy a new building. Common sense tells you that somebody leasing or purchasing a significant building would start six to eight months in advance — but many don’t.

It’s important to allow enough time to explore alternatives and create leverage so potential (and current) landlords don’t perceive time constraints. The goal is to complete a comparative analysis and create competition amongst several landlords. Finally, establish a time line and hold team members accountable for each step.

GARY LINDSEY, SIOR, is Senior Vice President in the Dallas Office of Grubb & Ellis Company and a 35-year veteran of the industrial real estate business. Reach him at (972) 450-3249 or

Wednesday, 26 March 2008 20:00

Brownfield redevelopment

Acompany that redevelops what is known as a “brownfield” can see long-term financial savings on its real estate purchase and, at the same time, enhance a community’s local environment.

“In most cases, you can turn that property into an asset, in part because the government provides funds for redeveloping it,” says Jeff Lemanski, a senior vice president in Grubb & Ellis’s Detroit office.

Smart Business talked to Lemanski about the difficult but eminently profitable venture of redeveloping a brownfield.

What is a brownfield?

‘Brownfield’ is a term that describes an environmentally impaired property. A property might qualify as a brownfield if it’s contaminated, blighted or functionally obsolete. Not as common are functionally obsolete properties because of factors like antiquated mechanical systems and lead water service lines. Brownfields are very common in Michigan due to the industrial nature of the state’s economy. Many brownfield properties are the result of leaking underground storage tanks, old landfills, chemical spills, illegal dumping, dry cleaning tanks and rail yards. Some of the successful brownfield redevelopment projects in the area include Ford Field, Comerica Park, Arvin Meritor and Renaissance Global Logistics on Fort Street, Fairlane Green (the former Ford Motor Company Allen Park Clay Mine), the Home Depot in Southfield (former landfill) and the Detroit International Riverfront Project.

What is Michigan Act 381?

Michigan Act 381 is the Brownfield Redevelopment Financing Act, which establishes a method to finance environmental response activity to a contaminated property. The incentives available include low interest loans, grants, tax credits, expense reimbursement and tax deductions. Some expenses that may be available for reimbursement include demolition and infrastructure improvements like grading, parking and installing utilities. Many times, a brownfield TIF (tax increment financing) can be established. With a TIF, the value of the property, which is typically depressed, is capped prior to redevelopment. Then, the incremental increase in taxes due to the brownfield development can be applied as an incentive to clean up and develop the property. Thus, the municipality provides an incentive due to the increase in value of the brownfield that it would have never realized had the property not been redeveloped.

Why consider buying a brownfield for commercial or industrial development?

For several reasons: First is the potential for a profitable development. Second, incentives are available for brownfields that aren’t available for normal developments. Third is the satisfaction of converting a problem property to a productive property. Fourth, you improve the impact on the environment.

What issues are associated with redeveloping a brownfield?

Brownfield redevelopment can be challenging but very rewarding. Because you are dealing with contamination, the process of identification, cleanup, due-care planning and applying for brownfield incentives takes longer than a normal real estate development. Developers need to plan for the process to take more time than with a nonbrownfield.

When working with municipalities and other government agencies on a brownfield redevelopment, it is best to fully understand the process required by the municipality prior to the commencement of the project. It is critical to contemplate issues early in the process and assemble an experienced team to meet all the challenges of working with brownfields.

Where does the real estate broker enter into the process?

The broker can advise the seller, create a disposition strategy, sell the property and assemble a diverse team to create a successful brownfield development after the sale. Some companies specialize in developing brownfield properties. Knowing these companies can speed up the process and improve the chances of successful development.

How much time does a total decontamination and redevelopment take?

It depends on the scope of the development and the nature of the contamination. I have a client who took six months from the time he started the process to the time a tenant moved in. Most projects will take longer.

Does brownfield redevelopment pay off financially for a company?

Brownfield redevelopment can be a winwin situation. Sellers win when they sell the property and eliminate or reduce any inherent risk. Buyers win because they acquire the property — usually at a significantly reduced price — and hopefully create a profitable development. The community wins with a ‘cleaned-up’ property that is paying taxes and creating new jobs. Neighbors win due to their property value increasing and the elimination of a problem property, and the environment wins. Because of the lower acquisition prices and incentives available, brownfield redevelopments can be very profitable when done right.

JEFF LEMANSKI is senior vice president in Grubb & Ellis’s Detroit office. He serves on the executive committee of the National Brownfield Association, Michigan Chapter. Reach him at (248) 447-2707 or

Wednesday, 26 March 2008 20:00

Retail site selection

This year could set a record for retail store closures. Even Starbucks, the growth-oriented coffee chain, will reportedly close as many as 100 stores.

By all accounts, it’s a buyer’s market. But that factor alone doesn’t make selection of a retail site any easier. As a matter of fact, the state of the economy makes it even more crucial to select the right retail site to fit into expansion plans.

“Selecting such a new retail store site is entirely different from choosing a comparable site or property that will be used for office or industrial purposes,” says Michael Dee, Senior Vice President and National Director of Retail in Grubb & Ellis’s Dallas Office.

Smart Business talked to Dee about all the factors that make retail site selection more science than art.

What criteria go into choosing a retail site?

Retailers use a lot of criteria that other commercial users wouldn’t even consider. Factors like traffic counts, ingress, egress, store signage and demographics are critical to a retailer.

Sophisticated market research is necessary to assist in market planning and new-store site selection. There are varying degrees of sophistication, but the larger national retailers have virtually all the tools. They even have precise and accurate new-store sales projections, plus store sales volumes for local competitors and for complementary surrounding retailers.

When retailers assess a particular area for expansion, existing and proposed shopping centers and high-traffic retail corridors are absolutely critical because they provide instant validation and credibility to a market. That’s why you see a Burger King next to a McDonald’s or a Home Depot across from a Lowe’s Home Improvement.

Traffic counts have become more precise, and many large retailers have that information on their computers. Some retailers will have some, but often limited, information on projected highway and road improvements and on new commercial and residential developments.

The most important factor is trade-area population density. Most retailers are looking at a 10-year time frame when it comes to new stores. That’s the lease term they are willing to commit to. They feel confident that the location is probably going to be solid for 10 years, given the population, growth, income levels and surrounding retail. After the 10th year, it’s re-evaluation time.

What other demographic criteria are valuable?

Critical demographics include household size, trade-area population, average or median household income, and employment base — factors that most retailers will look at first. In some cases, a simple lack of adequate population density will prevent the retailer from considering opening new stores.

Lifestyle characteristics are more sophisticated criteria, particularly income levels and type of employment base. For instance, when Starbucks first started expanding throughout the U.S., its first choice of new store locations was the upper- to middle-income demographic. Blue-collar areas were not even considered.

With all that technical help available, what can a real estate adviser add?

What a lot of the retailers don’t have is local market knowledge obtained on a daily basis. In other words, they might not know that the Kroger store across the street is planning to relocate two miles west. They are not privy to that kind of information. They might not be up to date on where the new residential housing is going up or whether the main highway is being widened and when. That is the kind of information that you can’t get unless you work the market, day in and day out.

A good real estate adviser also plays a vital role in negotiating with communities, developers and landlords. A prime example is Wal-Mart, which has found that cooperation and good will with local communities is absolutely essential to its new store expansion plans. In some areas, communities have prevented a Wal-Mart from being built, so proving the value of the store beyond sales tax is vitally important.

Cooperation from the community is also important to fast food and bank drive-throughs because so many see a drive-through as being nothing but a traffic nightmare — and, in many cases, they are correct. Some of the fast-food companies have to hire traffic engineers or outside consultants to do traffic studies and determine the impact of the proposed drive-through.

Where does a company seeking to expand by leasing or purchasing additional property begin?

Real estate is not the core business of most retailers. Therefore, they need to consider outsourcing the real estate function to a firm whose expertise is real estate. In that manner, the two firms become partners, and that’s truly the way the industry has evolved.

MICHAEL DEE is Senior Vice President and National Director of Retail in Grubb & Ellis’s Dallas Office. Reach him at (972) 450-3245 or

Sunday, 24 February 2008 19:00

There is no ‘I’ in team

Here’s a secret to building a productive sales team, from a man who’s been doing it for almost 25 years:

“I look for teammates who work together to hit singles and doubles consistently and bat .300 rather than recruit a superstar who may hit a lot of home runs but who wreaks havoc in the clubhouse,” said Jack Coury, senior vice president of Grubb & Ellis Detroit’s Industrial Group. “In business, like in sports, team chemistry is paramount.”

Smart Business talked to Coury about how he’s built a high-performing sales team, Grubb & Ellis’ team of industrial brokers who work Macomb County.

Is there a secret to selecting salespeople?

The first step is to formulate a vision of what the team should be. Realize this is a long-term process, not a short-term fix. In a relationship-based business like ours, the vision affects everything, and the team will take time to build.

A potential recruit needs to share the vision and must be a team player. Admittedly, it is time-consuming to get the right people and fill all available spots. Here is where patience is a virtue. Undoubtedly, because of what you are trying to create, like-minded individuals searching for a change will inevitably gravitate to you as the team develops.

Although salespeople conform to the environment they are in, human nature also plays its part. Everyone has basic values about what is right and wrong, what to do and what not to do. While the Golden Rule in treating others how you want to be treated is a good benchmark, behavior can change dramatically when money is on the line. Pursue people with good core ethics who are client-focused. They must be willing to combine efforts and share information to create a synergy where the team is better than the sum of the individuals on their own.

Here is a good example of how team-work can function. Last year, more than 85 percent of the 69 commissionable transactions I was involved in included one or more other team members. While this is rather unique in many sales organizations, in our business, it’s something that works well.

The one personality type you don’t want is the loner. These individuals place their own interests first, which causes continual problems with the team and leads to communication breakdown. For this concept to be successful, team members must understand that what is good for the team will ultimately be good for the individual. If the pie gets larger because of the group’s success, the team sees the virtue in that, and everyone gets their piece of the action.

What is the team leader’s responsibility?

Again, it is imperative that everyone share the vision. The priority of the team leader is to keep the group focused on the fundamentals and stay committed to that vision on a regular basis. Of equal importance is the knowledge that the team leader should give nothing less of himself than he asks of the team. The management style of ‘do what I say, not as I do’ just doesn’t work in today’s environment. Subsequently, the leader will be someone that others respect and whose opinion is valued.

How important is the financial package?

A prospective salesperson won’t move just for money, but money is definitely a motivating factor. Even if a candidate is in the same business, moving from one company to another is a challenging transition. Any organization must offer a competitive compensation package in line with current industry standards. The company’s reputation is also a factor — having a brand name that is recognizable helps open doors, giving its salespeople an edge.

The camaraderie and team aspect are also crucial components. As you get more established in your career, you want to surround yourself with good people. Work needs to be fun and fulfilling as well as productive.

How do you handle the team-building process?

It’s important to have open, constant communication among the team members. Scheduled meetings can sometimes get tedious, but they help to keep everybody focused. A productive part of those meetings is the opportunity to collectively discuss any issues in the market, present specific situations and brainstorm to come up with resolutions and different approaches that might solve a problem.

It is also important not only to focus on business but to promote an atmosphere where the team gets along with one another on a personal level. Attending functions outside of the professional arena [i.e. casual dinner, sporting events, etc.] helps the team become a quasi-family whereby team members pick one another up when necessary — because they know it will be reciprocated.

JACK COURY, SIOR, is a senior vice president in Grubb & Ellis Detroit’s Industrial Group. Reach him at (248) 372-2276 or

Tuesday, 29 January 2008 19:00

Managing litigation costs

Many of the costs a company incurs when entering into litigation are simply not controllable. So rather than wasting time and resources trying to accomplish the impossible, a strategy to manage the costs is more prudent.

“There are strategies for managing litigation costs,” says Irena Leigh Norton, a partner in the law firm of Shulman Hodges & Bastian LLP. “But no lawyer can come in blind and give you an accurate estimate.”

Smart Business talked to Norton about effective strategies you can use to manage litigation costs.

Why should companies be prepared to go to court?

In today’s climate, every business should be prepared to be sued. It is part of the shift in our culture and the ‘litigation lottery’ mentality. However, you can plan for what kind of litigation you are leaving yourself open to, and you can alter your business practices ahead of time.

For instance, maybe some of your existing procedures or policies are no longer appropriate under new laws. Since lawyers — unlike most business managers — monitor changes in the law as it evolves over time, yours can tell you where the risks are, where the concerns should be, and then he or she can offer you preventive advice.

How can a company plan for litigation costs?

Having an ongoing relationship with an attorney who knows your business can help determine where you need to allocate resources. If you wait until you are sued and then bring in a lawyer as a ‘hired gun,’ you do not have the benefit of those insights. This ongoing investment in the relationship is a way of decreasing the eventual litigation costs when you are sued.

It is important at the beginning of a case to meet with counsel and determine what key strategic areas need to be addressed. Periodically throughout the litigation process, you should get updated estimates and discuss strategy as events transpire.

One of the things most lawyers do is to budget in phases. A settlement after the trial will add very different costs than a settlement at an early mediation session midway through the discovery process. If the suit actually goes to trial — and a maximum of 10 percent of civil matters do — you and your lawyer should have a pretty good idea what the expected costs will be.

What litigation costs can be managed?

So much of what happens in litigation depends not only on your decisions but also on your opponents’ decisions. Discovery costs, however, are something that can be managed. There are times when investment in discovery costs can pay big dividends. However, one of the strategies that does not work is postponing all discovery until just before trial because you do not have the benefit of early depositions to determine the key witnesses. Thinking strategically about discovery at the outset of the case gets you ‘more bang for the buck.’

Electronic discovery can be very expensive — not so much in retrieving your own information but in gaining access to information held by the other side, particularly if you need to involve a forensic technician. Records over a long period of time may be involved and some might need to be resurrected because they have been deleted from the server. In contrast, while reports can be different, the data in computerized accounting records are not really different from that in the old ledger books of years past, so discovery expenses typically will be a lot less in cases where this information is the focus of discovery.

How does communication enter the picture?

Communication is key. As a preliminary matter, when you are a plaintiff or a defendant, you should give your lawyer as much information as possible: key documents, access to company officers and personnel with knowledge about the dispute, and access to electronic records. Once your lawyer has the universe of information, he or she can suggest the most cost-effective strategy and how discovery can be made both strategically and cost-effectively.

One big money-waster and budget-buster is the issue of communications between client and lawyer. Many times — particularly in high-stakes litigation — a team of executives might individually call the lead attorney. Each one of those calls adds to the total cost. As an alternative, you should have regular strategy meetings involving the lawyer and your entire team.

Also, certain procedures can be more effectively handled from a financial standpoint by using the appropriate assistants, like junior lawyers and even paralegals, rather than the lead lawyer.

How important is having the proper insurance?

While there are differences between being the plaintiff and being a defendant, under the appropriate circumstances, many litigation costs can be carried by the insurer.

One of the key recommendations that your lawyer should make is to ensure that you have the right kind of insurance coverage for your type of business and potential litigation exposure — for example, directors and officers and/or errors and omissions coverages. So it is a good idea to review insurance coverage with your general counsel as soon as possible. <<

IRENA LEIGH NORTON is a partner in the law firm of Shulman Hodges & Bastian LLP. Reach her at (949) 340-3400.