Real Estate Advisor Law Blog

Real Estate Advisor Law Blog

All I Really Need to Know About Client Service I Learned in a Restaurant

Posted in Leasing Issues

Scott KadishI am a commercial leasing attorney at a large firm. I have developed a decent stable of loyal clients, but not because I am the smartest attorney in the world. I like to think I’m smart, but I would be less than honest if I said that my success is due to being the smartest guy in the room. No, I believe my success is attributable to my client service. I know I have done my job when a client asks if they are my only client. So what is good service? It is not merely returning phone calls or emails. It is going above and beyond expectations. And who is the client? It should not just be the ultimate consumer, but everyone you work with and for. So it is not just the CEO of the company for whom you are providing services, it is the secretary or administrative assistant at the company, it is every other employee at that company with whom you may interact, and it is your superiors at your own company.

I waited tables to help pay for college. As a waiter, my income was 100% dependent on providing good service. And that meant not just bringing the meal, but like an attorney going above and beyond expectations. In many ways, everything I really need to know about client service I learned from being a waiter.

  1. Be present and alert. If a customer needs something, do it before they have to ask.
  2. Be timely. Never make a customer wait. Get them what they want quicker than they expect. Every customer should feel as though they are the only table you have.
  3. Be pleasant. Your attitude creates the customer’s experience. Nobody wants to deal with a grouch. And the biggest tips come from the customer who is demanding and unpleasant. If you can maintain a pleasant disposition and positive attitude, that customer may end up being your most satisfied loyal customer.
  4. Be deferential. Never talk down to a customer; make the customer feel good about themselves. Do not assume the customer can’t afford or appreciate your service. You never really know the opportunity presented. Being snobby though is one sure way to ensure you will never find out.
  5. Be neat. Nobody wants to be served by or interact with someone with bad hygiene.
  6. Be accountable. If a customer complains, say you’re sorry and fix it. Even when the complaint is unjustified. The customer is always right.

CALL TO ACTION!

Posted in Legislative Update, Tax Credit Issues

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I just thought everyone should know that the federal historic tax credits are in clear jeopardy of being repealed as part of the Trump administration’s approach to tax reform policy. Speaker of the House Paul Ryan’s “Better Way Blueprint,” which specifically repeals the historic tax credits is currently in the House Ways and Means committee for consideration.

If you are reading this blog, you are probably a supporter of the historic tax credit. As a refresher, here are just a few reminders of the positive aspects of historic tax credits many developers and neighborhoods stand to lose out on if the credits are eliminated under new tax policy:

  1. Historic preservation is key to urban revitalization and Cleveland is a prime example of that.
  2. It is a huge job creator; nationally it has created 2.3 million jobs.
  3. It improves the housing stock in much needed neighborhoods.
  4. It pays for itself. Of the 23.1 billion dollars in credits there have been 28.1 billion dollars in tax revenue created.

If you want to take up this call to action to protect the historic tax credit, the House Ways and Means committee is currently the author of the tax reform bill. There are 2 Ohioans on this committee, Pat Tiberi and Jim Renacci. Now is the time to reach out to them and tell them about specific projects that have been completed or are in the pipeline of which you are aware. Let them know the importance of saving historic buildings. Specifically ask them to support the Historic Tax Credit Improvement Bill (HTCIA). Their contact information is as follows:

Pat Tiberi – OH-2 – Whitney Daffner – whitney.daffner@mail.house.gov – (202) 225-5355
Jim Renacci – OH-16 – Randy Herndon – randy.herndon@mail.house.gov – (202) 225-3876

If the historic tax credit is repealed in the Houses’ version of the tax reform bill, then the bill goes to the Senate finance committee for review and approval and there are two Ohioans on that committee as well, Rob Portman and Sherrod Brown. If you have a relationship, reach out to them.

Rob Portman
(202) 224-3353

Jim Renacci
(202) 224-2315

A Lesson in Ground Leasing

Posted in Leasing Issues

Lovett_43_background_RGBSo I don’t know about you, but every time I turn on NPR lately there is some discussion about President Trump’s conflict of interest because of his Washington D.C. Hotel built in the former U.S. Post Office with a ground lease from the GSA. For those of you who do not spend your days analyzing ground leases, I thought it might be helpful to know what they are and why anyone would want one.

In short, ground leases are a method of transferring most of a property owner’s interest in a piece of real estate to a tenant while allowing the property owner to retain a residual interest, and therefore some control, in the real estate. Ground leases typically have lengthy terms (75-99 years) and often include renewal options.

With a ground lease, the real estate owner gets a steady stream of income from the lease payments, which are usually based upon the value of the real estate plus interest amortized over the term of the lease. If the tenant defaults, the landlord gets the property back (usually after very generous cure periods). At the end of the term of the lease, the real estate and the improvements go back to the property owner. There are often covenants in the lease that require the developer/tenant to complete the intended project.

The advantage of a ground lease to the developer/tenant is that they “pay for” the land over the term of the lease rather than up front. The tenant ends up with all other ownership rights and obligations for the term of the lease. Sometimes, as I imagine is the case in President Trump’s deal with the GSA, it may be the only way that the developer can have access to the real estate. The GSA may have to go through a process to determine that it will never need this real estate in the future.  Once the GSA determines that it does not need the real estate, the GSA would then need to take competitive bids on the sale. This process would make it difficult to strike a deal with any one particular developer.

I hope you have enjoyed your ground lease lesson for the day….

Change

Posted in Leasing Issues
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I’ve been thinking a lot about that word lately. Change. I get it that change is constant and to be successful you need to embrace change. That doesn’t mean we should just accept changes that are bad. No, I think it means that we need to accept that change is inevitable and be ready to respond to change with a positive attitude, which may include working in opposition to changes that are perceived as bad or negative and putting yourself in position to capitalize when that negative change has run its course and dissipated.

Introspectively, Winston Churchill said, “To improve is to change; to be perfect is to change often.” I have recently made a big change in my professional life. I was elected to be Managing Partner of Ulmer & Berne and so a good portion of each day now involves attending to the duties of a Managing Partner instead of drafting and negotiating retail leases. I still plan to devote a significant amount of time to my leasing activities, but clearly my job description has changed. Unfortunately, being Managing Partner reminds me every day just how imperfect I am.

The business of law firms is clearly changing. There is increased competition for good work. There is pressure to keep rates down. Technology has increased the pressure to work 24/7 and respond immediately. At the same time, professionals want more time away from work. No self- respecting attorney can easily embrace these developments, but we all need to adopt strategies to address these issues with a positive attitude.  At Ulmer, these strategies include: (1) differentiating ourselves through fanatical, user friendly client service; (2) focusing on project management as a way to economically staff assignments; (3) maintaining a collegial, supportive work environment free from internal competition to maximize the benefits of a team approach; (4) pushing management down to the practice group level where those on the front line can quickly and effectively manage our practice; (5) promoting diversity in the firm to create a better work environment and appeal to a wider array of clients; and (6) implementing a growth strategy to add similarly minded folks.

To be sure, more change is coming. Multi-disciplinary firms, technology changes and legal regulation changes will all change how we will need to do business. By retaining our culture and front-line management, we should be positioned to respond accordingly with a positive attitude.

On a personal level, I need to improve (i.e., change). I need to listen better – to pay more attention to what others are saying (and not day dreaming about the Red Sox’ need for better starting pitching) and not interrupt others because I think I know better (you know you have issues with that – and all attorneys do to one degree or another – when a partner says you are doing a good job but you really need to stop cutting everyone off). Someone once said “envision the period,” meaning wait until they have finished what they are saying before you respond. I need to be clearer in my communications and not just assume everyone understands my short-handed jargon. I need to exude a positive attitude even if my dog ran away, my car broke down, or a tree fell on my house. I need to be able to admit a mistake and be able to change my mind.  I used to think if you don’t agree with me it’s just because you haven’t been listening close enough.  I have repeatedly learned that I am not the smartest one in the room – we have some really good attorneys here, but I am pretty good at drinking beer – no that’s a song that’s stuck in my head, sorry – I am pretty good at bringing people together. And I think I can capitalize on that ability if I listen better and understand my partners’ needs, attitudes, and abilities.

Anyway, all I can control is my attitude and effort. And I’m going to give it my best shot.

 

That’s Funny – I Don’t Care Who You Are

Posted in Leasing Issues

Allen Klein said that humor cannot change a situation, but it can change your attitude about it.

I am working on a lease where I represent a restaurant tenant against a well-known, national REIT landlord. Needless to say, the landlord’s form lease is crazy-long and overly one sided, and the landlord is not very flexible. Faced with that situation, it is easy to develop a bad attitude.  So when I got the landlord’s response to my comments (all of my comments were of course absolutely necessary just to get the lease in a reasonably fair condition), or should I say rejection of my comments, I started getting irritable.

But then halfway through the lease, I saw the landlord’s attorney had inserted a provision requiring our client to provide free wine to the landlord’s attorney as a way to resolve a certain issue. I laughed out loud and some of my irritation with the attorney went away. Then, in response to my question as to how trash is handled at this center, the attorney said, “with gloves – it’s kind of gross.” That too made me laugh out loud. I started thinking I might even like this attorney.

In all seriousness, his humor did change my attitude. I saw where I might have been disagreeable merely because of the situation, as opposed to focusing on the actual substantive issue and its relative importance to our client. The fact is that the attorney’s humor made me more receptive to his position. And it made a difficult negotiation more enjoyable.

I like to joke, but my family tells me I have a propensity for telling bad jokes and a bad joke is worse than no joke. In fact, I’m not even kidding when I tell you that when he was 11 years old my oldest son (he’s now 28) wrote a school project describing me and said I will joke around or be serious, and if I tell a joke it might even be a funny joke. Now that’s funny!

A New Cycle?

Posted in Leasing Issues
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It seems like lease issues come in cycles: seemingly out of nowhere, a particular issue that may have never been a concern on previous leases arises suddenly only to disappear once again. Is the rise to prominence of a certain issue indicative of something larger at play? Here are the issues I seem to be facing every day now.

Even small (in terms of leasable area) tenants receiving large allowances feel the need for an SNDA. These same tenants insist on every right in the lease carrying over to the lender. Lenders refuse to come out of pocket, even to allow the tenant to offset rent if it fails to receive the allowance (although the tenant must of course still pay full rent). Landlords want the tenant to pay the fee charged by the lender to execute the SNDA.

Landlords want the right to recapture space from a tenant who closes without reimbursing the tenant for any unamortized costs, even when the tenant has no operating covenant.

Tenants who pay percentage rent still want the right to go dark.

Landlords who breach a tenant’s exclusive on purpose want a fish or cut bait clause.

Landlords want the tenant to pay for the landlord’s loss of rent insurance, but do not want to allow the tenant to abate rent after a casualty.

Tenants want shell entities to be the tenant, want limited guarantees, and want to be released on assignment.

Landlords agree to a build-out period, but insist on having it start on the day of delivery even if the tenant has been unable to get a building permit.

Landlords want the right to charge an administrative fee on all CAM, even “non-controllable” items, in addition to a management fee.

Landlords say the covenant of quiet enjoyment is subject to mortgages and other encumbrances.

I will be glad when this cycle ends and we can go back to arguing over normal co-tenancy provisions. (Did I really just say that?)

Cincinnati Commercial Real Estate Summit

Posted in Retail Industry Issues, Uncategorized

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I just attended the Midwest Real Estate News Magazine Cincinnati Commercial Real Estate Summit. I heard a very interesting discussion about the Cincinnati real estate market, addressing retail, office, industrial, healthcare and investment properties.

Norm Khoury of Colliers International was the moderator.

John Thompson of Newmark Grubb Knight Frank discussed retail issues. John commented that the retail market may be softer than the other segments: there are less retailers due to consolidation and the increasing presence of big box retailers, and there is less demand for retail space in general due to internet shopping. Demand in the retail market is largely based on service providers because as John said you can’t get a haircut over the internet. John also pointed out the explosion in fast casual restaurant concepts and that food is driving demand at strip centers. However,  many of these retailers are finding it hard to find sites and are all fighting over the same locations because developers are not building new strip centers in Cincinnati.

While the internet may affect demand for retail sites, Jeff Bender of Cushman Wakefield pointed out the internet has helped the industrial segment. There is an increased need for warehouse and shipping space to service the internet buyer.

Steve Timmel of Colliers International discussed the challenges of office development where the landlord must be prepared to pay large allowances in relation to the rent being charged. He contrasted that with apartment developers who can expense turn over costs. That led to a discussion on how a municipality could partner with an office developer to increase office development. A new office will produce additional payroll tax. A municipality could fund or help fund the tenant allowances and receive a good return by way of increased taxes. A great idea, but apparently not many municipalities are willing or able to do that.

John Rickert of SVN RICORE Investment Management Inc. and Paul Heiserman of JLL also served on the panel. It was a very interesting presentation and a very impressive panel of speakers. Clearly we have outkicked our punt coverage: the quality of the real estate professionals in Cincinnati exceeds what you might expect given the size of our market.

New Wage Theft Ordinance In Cincinnati

Posted in Administrative Matters

Hands_background_CMYKCincinnati City Council recently enacted an anti-wage theft and payroll fraud ordinance designed to protect workers and insure that those doing business with the City pay their legal share of taxes and other financial obligations. The Ordinance is also designed to protect law-abiding employers from unfair competition from businesses that are willing to break the law to make a profit.

Cincinnati’s new Ordinance incorporates rules for reporting theft, a wage recovery policy and debarment penalties prohibiting companies found guilty of wage theft from doing future business with the City. As defined in the Ordinance, wage theft means not properly paying workers for all work performed – most commonly by paying less than minimum wage, not paying for all hours worked, or failing to pay overtime, in violation of existing local, state or federal law. Payroll fraud is described as concealing a business’ true tax or financial liability through tax evasion or fraud, misclassification of workers as independent contractors when they are actually employees, unreported or underreported payment of wages, or paying for a business transaction in cash without appropriate records.

Authored by Vice Mayor David Mann, the Ordinance (22-2016) is the first of its kind in Ohio. Similar ordinances have been enacted by cities across the country that determined wage and hour laws were not being adequately enforced by State and Federal governments.

 

Domestic Buyers and Foreign Seller’s

Posted in Tax Issues

As a result of the Protecting Americans from Tax Hikes Act (PATH) passed by Congress and signed into law in December, 2015 effective on the 16th of February, 2016 changes to the FIRPTA (Foreign Investment in Real Property Tax Act) go into effect. The withholding tax on foreign sellers will increase from 10% to 15% of the sale price of real estate. As with all real estate transactions “buyer beware.” If a buyer fails to determine if a seller is foreign or domestic the buyer could be held liable for any tax owed by a foreign seller. Check your purchase and sale agreement representations and warranties!


What Do Ted Jones and Doug Forbes Have In Common?

Posted in Development, Tax Credit Issues

-a39c602538327c8aFirst of all, Ted Jones is an economist who presents his economic forecast to the clients of NorthStar Title every January. Secondly, Doug Forbes is my brother who lives outside of Philadelphia. My brother had not been to Cleveland for 8 years when he came in for a short visit after Christmas. I took my brother on a quick tour of downtown Cleveland, Ohio City, Tremont and Gordon Square. I showed him all the new development that I have worked on (mostly historic conversion into apartments) but also the new Convention Center, the surrounding new hotels and, of course, the world’s largest outdoor chandelier in Playhouse Square. He was dumbfounded and could not stop talking about Cleveland’s comeback (which I had been telling him about for the last several years.) He started texting his wife and family back east. He sent them pictures. He emailed me when he got home and said WOW, maybe I should move back to Cleveland.

Last week, I went to listen to Ted Jones’ yearly presentation. He said that this was the first time in the 10 years that he had been coming to Cleveland that he could say that Cleveland is doing great economically. He cited our connection to the auto industry as one of the primary reasons. He also said that the retail boom is just starting and entry level homebuyers are returning to the market. But he also talked about our redevelopment and the strength of the housing market, in particular rental housing. He was high on Cleveland. Although Ted is from Texas and Doug is from Pennsylvania they are both now Cleveland fans. They finally see what I have seen for a long time. Cleveland is truly a renaissance city and I feel fortunate to be a part of its redevelopment.

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