Hiring Commercial Broker and Lawyer in the same city?

Question

Years ago, my parents did a 1031 exchange and purchased a good retail location, but the lease is coming to an end and our tenant is leaving. I don't live in the same state as the property, so I'd like to hire a commercial real estate attorney and a commercial agent to help me either find a new tenant or sell the property.

Certainly, I need to engage a commercial broker who knows the area and the market well, but should I engage a lawyer in the same area?

I'm sure there are benefits to having a commercial real estate lawyer who is also local and knows the area, but the city is small and I'm concerned that the broker and the lawyer will probably know one another and be more interested in maintaining a good relationship with each other than protecting my interests.

Can anyone comment or offer and advice on this concern?

And can anyone tell me what a commercial attorney might charge to assist in such a transaction?

Many thanks

Joel Owens · Answer

What kind of lease do you have with the tenant that is leaving? NNN,NN,ground?What were the in place rents? At,above, or below market for a building space that box size of (2k,5k,10k sq ft)? For retail you need to look at retail rent comps for box sizes.How much proceeds would you have for a 1031 exchange to move into another property? There are tons of layers to this evaluation of hold versus a sell position. If selling there is (end user) pricing such as the potential tenant but wants to own the building and land so they buy it from you, a passive investor trying to just collect a check ( your site is fixing to go dark so not a great fit), or a value add investor/developer ( they look for properties below market they can re-tenant and make more valuable). The investor developer does not generally pay full market value as there is no money in it for them.So it sounds like you either need to re-tenant it, sell to an end user, or if there is another highest and best use a developer might buy based on dirt value and improved re-development potential with air rights to increase property values. It can be good to have a local commercial attorney. I stay away from any commercial attorneys that also do litigation as they are constantly in court and little to no time for transactions. Also I make sure they have experience in the deal size level and asset type (retail) I am doing.If you had a ground lease for example you might be able to re-tenant the property at a higher lease rate to NNN with new tenant.No legal advice given.

Joel Owens · Answer

As far as commercial brokers competing for the property if a broker is busy they do not have time for that stuff. Maybe junior agents at firms with a side hustle.The big players time is money so will only spend time on those sellers who will give exclusives. Basically if an owner or buyer is all over the place talking to tons of people I won't even return the call. That shows me the seller or buyer does not want to commit to anybody even if they are experienced and if that's the case they are not getting my full time and effort for a non-committed relationship. I save that for the clients.Hope it helps. If you call around and find someone that sounds really good you might just want to give them a try.

Rob Mackowski · Answer

@Alex Rand don’t sell. If it’s a high traffic corner at a signalized intersection it should be in demand.

Ronald Rohde · Answer

Selling a property is typically a lot less labor intensive, hire the lawyer to review the inevitable modifications and PSA changes.

Jeff Kehl · Answer

@Alex Rand if I was in that position I would contact as many commercial brokers in the area as possible and let them compete to help me with the property. Comparing the different responses you get from them you should get a good idea of the best person to help you. You will also generate a lot of interest/buzz for the property. Make sure to call everyone including national brokers, marcus & millichap, cbre, cushman & wakefield, jll colliers and also any local ones you get from a google search. Also call any local residential brokers that sell commercial properties. Ask everyone you talk to who is the best commercial attorney in town. You may or may not need them, just hire them if you're unhappy with the way things are going.

Alex Rand · Answer

Huntsville, Alabama

Joel Owens · Answer

Alex I do a lot of business in Texas. I have over 250 retail property owners in my database there.What type of broker you need will depend on strategy. Some brokers do not work on deals that are a certain size or smaller. Example if someone wants to buy a Starbucks for 2 million it's one lease. If someone wants a 2 million center with mom and pop tenants it can be a nightmare to underwrite and take up a ton of time for a small check. Mom and pop tenants there could be 10 with leases 50 pages each that is 500 pages. You review the other items over 1,000 pages.That versus T-mobile,Aspen Dental, Starbucks 3 tenants with leases maybe 150+ pages all together. Easier to fund deal as well. I have talked to many thousands of investors over the years. They all buy and sell with various strategies and how they like to do business. Sometimes that aligns with my business model and other times it doesn't.It's fine with me. I get 10 investor closings a year on my terms I make 1 million in commission at 100k a pop. Life is less stressful as you take clients that fit with your business model. Had one the other day a nice guy contact me but he wanted to (wheel and deal) with buying a center and then wanted me to manage it for reduced percentage below market so he could higher cash flow. I told him I do not offer property management and there are other companies for that and we were not a right fit for each other.My average is about 3 out of 10 initial contacts become clients. The rest are flakes, too controlling, business model that doesn't fit mine, initially was interested in NNN commercial but decided to stick with residential,etc.,etc.

Stanley Bronstein · Answer

What city?

Alex Rand · Answer

I agree, but it is a great corner in a growing city. I'd really like to hand on to it if I could.

Alex Rand · Answer

Rob, WOW! Thank you so much! Great resource.