Author Archives: David Massie

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Exclusive Unlisted Off-Market Commercial Property for Sale in Conejo Valley

David Massie of DJM Commercial Real Estate has an exclusive unlisted off market income property for sale in Conejo Valley in Rock River Plaza that is an amazing opportunity. The address is: 28118 Agoura Road, Agoura Hills, CA 91301.

Property details for this sale listing: 

  • 100% occupied with quality long term leases and credit tenants in place
  • 2018 net income projected to be about $248,000
  • About 13,000 RSF
  • Owner only occupies a 600 sf space and can stay and lease out or move out
  • One tenant’s lease expires in Feb. 2019 of about 3,500 RSf – owner can move into this space or can move into owner’s unit mentioned above. Another option is to keep the tenant in place.  All other leases expire in 2020 and 2021
  • The property is about 15 years old.  Very quality “A” type build
  • There is enough parking at between 4-5 per 1,000 to do some medical/dental uses
  • Exterior building with signage potential has good exposure
  • 28118 Agoura Road, Agoura Hills, CA 91301
The current owners are asking for about a 5% cap, which is about $5 million, but they are also open to reasonable offers. This is an incredible opportunity to move quickly on as it’s currently unlisted and off-market for the time being!
If you have someone interested in buying this off market listing, or if you have any additional questions, please contact David Massie at david@djmcre.com or call him at 805-217-0791.

Best Ways to Negotiate Your Commercial Lease Renewal

Whether you have an office, retail or industrial commercial lease, there is really only one good way to negotiate your lease renewal: Hire a good commercial real estate broker. If you don’t hire one and try and negotiate the renewal on your own, then you will be sorry as you will most likely miss out on your best deal.

One of the main reasons commercial tenants don’t hire a commercial broker to renew their lease is because the tenant thinks they will have to pay the broker directly. Although this might happen, I normally am able to get the landlord to pay me a commission for representing the tenant at renewal time. Why would a landlord pay me a commission when they have the tenant already leasing space at their project? Because I can find this tenant another location elsewhere. And the landlord also wants to entice me to bring them more deals to their project in the future.

What if the landlord won’t pay me, your broker, a renewal commission and the tenant doesn’t want to move to another project? Then I usually enter into a flat fee agreement with the tenant I represent. But my very reasonable fee pays for itself many times over. This is because I am able to negotiate things on behalf of my client that my client could not negotiate on his own. Landlords don’t give you, as the tenant, a credit for not using a broker and it is simply the wrong choice not to use one.

There is more to a successful lease renewal negotiation than just negotiating some of the numbers like rent. The lease itself is complicated and you need to understand what you are agreeing to and how each of the clauses in the lease might adversely affect you in the future. This is especially true in terms of hidden costs you aren’t aware of. So, having your broker review the lease and negotiate the clauses that are unfair or costly is huge reason not to do it yourself.

Think about it. You, Mr. Tenant, don’t know the commercial real estate market like your landlord does. So why, Mr. Tenant, do you think you will do your best if you negotiate against your landlord? You won’t until you hire the right broker. It’s always worth a try to hire a broker to see if the broker can do better than you can and better yet to see if the landlord will pay your broker so you don’t have to. Stop leaving money on the table and hire me now for your renewal or new commercial lease negotiation. I have negotiated over 1,000 leases successfully.

If you want to learn more about leasing, buying and/or selling any and all types of commercial spaces in California or if you have questions about any subject related to commercial real estate, please contact David Massie of DJM Commercial Real Estate at david@djmcre.com or 805-217-0791.

Is It Better to Buy or Lease Commercial Real Estate?

Clients ask me this question quite a bit.  The answer depends on many factors and it is different for each client depending upon the current market parameters and their unique circumstances.

Right now, the California commercial real estate market for retail, office and industrial properties for sale and for lease in which I specialize in is pretty hot and has been for many years.  Prices for both sales and leasing have exceeded all-time highs historically in most California cities especially in Southern California where most of my transactions take place.  So, when prices are high it means that it’s not a good time to buy or lease, right?  Not necessarily.  And what if you have a business and have to do one or the other, which one do you choose?

I define businesses that can occupy at least 51% of a building as “owner/users”.  Many times owner/users can pay more for a building because they can get a better loan than investors buying properties not occupying at least 51% of the building.  They also usually get better tax treatment when owning rather than leasing.  Owner/users have been buying quite a bit in the last couple of years.  They are buying even though prices are high, because of low interest rates and preferential tax treatment. The draw for these types of buyers is that it is better compared to leasing and, many times, that proves to be the case.  If they don’t occupy the entire building, but at least 51%, then they can lease out the rest of it which can also add to the positive bottom line.

Whether you are an owner/user, or a business that can’t qualify as an owner/user, you have to compare the costs of leasing versus buying.  You have to take into consideration not only the loan and down payment costs, but also the tax implications.  This is where your unique circumstances come into play.

Here are some common reasons why you shouldn’t or can’t buy.  In these situations, leasing is better:  If you don’t have enough money for a down payment, if you can’t qualify for a loan, if you might significantly expand or contract your space in the future, if you don’t have money for building improvements that landlords take care of if leasing instead, and many more reasons.

There are many factors that go into figuring out if it’s better to buy or lease.  Every situation doesn’t come out with the same answer.  A good broker can advise you and help you to figure out the right answer for you.  More on how to find a good deal on a property to buy in any market.

If you want to learn more about leasing, buying and/or selling any and all types of commercial spaces in California or if you have questions about any subject related to commercial real estate, please contact David Massie of DJM Commercial Real Estate at david@djmcre.com or 805-217-0791.

Who Pays Your Commercial Real Estate Broker and How Much?

Although the answer might seem obvious to some, this question is asked of me quite a bit in my role as a commercial real estate broker in California.  Generally in California for retail, office and industrial properties (and I am going to focus only on these since these are the ones I specialize in), the landlord or seller of a commercial property pays your broker a commission for your broker bringing you to the property. Many people believe that commissions are negotiable. This is true to some extent in theory and legally. In reality, about 99% of the time there is a market standard commission in the commercial real estate industry for a particular type of commercial property lease or sale that everyone agrees to.

The total commission usually paid by a landlord or seller is 5-6% of the total rent over the lease term or the sale price.  This commission amount can vary.  This is especially true for more expensive properties for sale in excess of 10 million dollars. In those cases, the commission total is usually less and can instead be a set fee of say $200,000 as an example.  The landlord/selling broker enters into a contract with the landlord/seller for the entire commission, but then has to split that in some fashion with a tenant/buyer broker unless the landlord/seller broker also represents the buyer. (This latter scenario is called a dual representation and something I strongly recommend against ever doing as a tenant/buyer for many good reasons; more here on this subject.  In Southern California, the splits vary between the two brokers depending upon whether the deal was retail, office, industrial or other type of property.

Let’s assume a 6% leasing and sales commission for our examples that follow.  Retail and industrial deals usually split the leasing/sales commission evenly (3% to each broker). Office deals usually pay 4% to the tenant’s leasing broker with the remaining 2% going to the landlord’s broker. But, for sales, the commission is split evenly. Therefore, in this example, it would be 3% to each broker.  Note that industrial deals for leasing and sales tend to be at total of 5% and not 6%, but office and retail are usually 6%.

So, if you are a tenant or buyer, you can see that hiring your own broker to represent you doesn’t cost you anything. It also doesn’t make your deal more expensive, because the landlord/seller is already paying one commission and requiring his broker to split that fee with another broker as necessary.

Bottom line:  It’s a no brainer to always have your own broker representing you when leasing or buying. It doesn’t cost you anything.  Having your own broker should save you time, money and headaches.  You do have to choose your broker wisely to get the most of them (more here on how to find a good broker).

If you want to learn more about leasing, buying and/or selling any and all types of commercial spaces or if you have questions about any subject related to commercial real estate, please contact David Massie of DJM Commercial Real Estate at david@djmcre.com or 805-217-0791.

Potential Fix For Medical Space Shortage & Retail Vacancies in Southern California

There is a shortage of medical space and an increase in retail vacancies in southern California right now.  So, why don’t medical tenants lease space in retail centers as compared to an office or medical building that they traditionally lease space in?  Doesn’t this solve some of the problems for both types of spaces?

Some medical tenants such as optometrists, dentists, physical therapists, chiropractors, and a handful of others do lease space in retail centers.  Why do they lease space in a retail center?  Because they probably make more money when their businesses are in a quality retail center with good parking, signage, and retail visibility from shoppers at the retail center.  The main criteria for any business is usually the bottom line so, if being in a retail center increases your net income, wouldn’t you want to be there?  This is rule #1.

Sometimes the rent, improvements and other costs can be higher in a retail center, but not always. If you make enough additional income leasing at a retail center to offset this cost, then this objection isn’t a good one.  Another objection might be that medical providers get more referrals from other medical providers that lease in the same medical building.  This can also happen in a retail center if there are other medical providers there. They can still get referrals from outside the retail center from these medical providers that lease in the medical office buildings if they develop a relationship with them. It might not be the same, or potentially as many, referrals as the medical building scenario, but again, see rule #1 above. At which location are you making more net income?  The referrals might not be the same as in the medical building scenario, but there might actually be more referrals in a retail setting because of the other retail tenants now referring you and the amount of potential customers a retail center has. This is especially true in comparison to a traditional medical building scenario which is much more limited in potential new customers finding you.  Finally, it’s possible that some medical providers simply think their status will be somehow lowered by leasing space in a retail center and that a nice medical building is preferred by their patients.  This might be true for some patients, but I would doubt most of them would care. If they are like me, they want their trip to the doctor to be the least painful as possible. Not to mention that a good retail center is much more fun than a boring medical building any day.  I can see some types of medical users and their patients wanting it to be quieter than a retail setting, but again -doesn’t rule #1 above trump even that for most medical tenants?

Retail space in southern California is undergoing a change.  The smaller to medium sized retail centers in particular are starting to become more restaurant/food and service focused as opposed to other types of retail uses.  Customers at retail centers want to enjoy their experience and be able to do as much as they can at one location.  So, with the foregoing in mind, wouldn’t many medical tenants fit in with this new retail trend of a retail landlord leasing to service providers like doctors and providing a better experience for the retail customer?  I think so.

If you want to learn more about leasing, buying and/or selling any and all types of commercial spaces or if you have questions about any subject related to commercial real estate, please contact me at david@djmcre.com or 805-217-0791.

Options to Renew Your Lease: The Good, The Bad, The Ugly

You are a tenant leasing some kind of commercial space like retail, office, industrial or otherwise.  You were smart and negotiated at least one option to renew your lease.  But, should you exercise that option to renew?  Do you really understand what conditions in which it would be favorable or not to exercise this option?

In my market in Southern California, most landlords will grant a tenant who is leasing commercial space an option to renew their lease for one additional lease term that is less or equal to their original term.  For example, if you leased for a 5 year term then you could usually negotiate a 5 year or less option to renew.  If you leased for 10 years, you might get one 10 year option to renew or perhaps two 5 year options to renew.

But here is where it gets tricky.  It’s generally not in your best interest to exercise your option to renew. Instead, you should think of it as a last resort.  Option to renew language usually contains a certain minimum rent to the landlord. For instance, it may be no less than what you were paying at the end of you current term or maybe it has a 3% bump above what you are paying at that time.  I have found that market rents are usually lower than what your option to renew requires you to pay.  And what about current market tenant concessions like free rent, improvements, etc.?  You will most likely miss out on these.

Another provision that option to renew language usually contains is that the lease (except for the rent) will be on the same terms and conditions.  So, if there is a clause in your lease that needs to be negotiated you may want to reconsider the option to renew.  These clauses could include receiving a new base year for operating expense increases for an office tenant or excluding unreasonable lease clauses from applying. For instance, certain Triple Net clauses could be excluded for a retail tenant if you negotiated your renewal instead, but these exclusions won’t apply if you simply exercise your option to renew.

What is a tenant to do?  Hire a good commercial broker to help.  This broker will know the current market rents and be able to review the lease with you and recommend all necessary changes.  If the broker is active in your area, then the landlord will be concerned that this broker might relocate you to another building if the landlord isn’t fair.  You simply don’t have the same clout without a good broker and you won’t get as good of a deal.  But do it at least 6-12 months in advance of when your current lease terminates or at least 3 months before you have to exercise your option to renew so your broker and you have time to review your needs and options. One other really good thing that happens when you don’t exercise your option to renew, but rather negotiate your renewal, is that your option to renew many times gets left in place and is still valid the next time your lease terminates.

I have successfully represented many commercials tenants for renewals for their leases and not just new leases.  I can’t remember the last time I didn’t do much better than the tenant could do on their own.  Many times the landlords end up paying my fee for the tenant’s renewal just like they always do when I represent a tenant for a new lease.

For more information about commercial leasing, buying, and selling please contact David Massie at DJM Commercial Real Estate at 505-217-0791 or david@djmcre.com.

Commercial Real Estate Dual Representation: Possibly Illegal Soon?

Assembly Bill 1059 has been introduced to the California Legislature to ban commercial real estate dual agency relationships. Specifically, the bill “would prohibit an agent from acting as a dual agent in a commercial real estate transaction,” and also prevent different individuals in the same firm from “acting as an agent for both a seller and buyer in the same commercial real estate transaction.”

There are many pro landlord groups opposing this bill like AIR CRE.  Why?  In my opinion, it’s because it will help the tenant and buyer and reduce the profit of the landlord and seller.  Just read some of the weak arguments made by AIR CRE here.  All of them primarily have to do with a landlord or seller making less money or not doing as well somehow.  Don’t you feel sorry for them?

Dual Representation is not legally allowed in many states.  Why?  Because it can’t be done without violating ethical issues as there are simply too many conflicts of interest.  The tenant/buyer loses big time and the owners and their brokers gain big time. This is why so many brokers and owners are in favor of it.

For 25 years I worked as a landlord and seller and directed some very large real estate companies that owned millions of square feet of commercial property across the US and even internationally.  Many brokers wanted my business because I could give them 5 or 6 figure salaries off some of my properties in any one region that I controlled.  As a landlord, I loved it when my brokers were able to do dual representations because I had a great amount of leverage over the brokers who worked for me.  If they, or anyone in their firm representing a tenant/buyer, pushed too hard for a tenant/buyer at one of my properties –all I had to do was hint that they might not be able to keep my listings.  Would a broker risk losing a 5 or 6 figure salary working for me over one deal where they also represented the tenant/buyer?  Not likely.  That is all it took for the tenant/buyer to not get as good of a deal as they could have received had they used another broker from another firm; a firm that was not affiliated with a listing broker who worked for me or that wasn’t trying to get listings from me.  This is why dual representations shouldn’t be done.

Even though dual representations are legal in California, I won’t do them.  They should be outlawed.  Ask any good real estate attorney how it goes in court when they have to defend a broker for a dual representation. Attorneys that I have spoken with that have experience in this matter have said “it’s not a matter of whether they can win the case but rather of how much they can settle for”.  This is because these attorneys know that it is impossible for a broker to represent both parties correctly without fault.

Can you imagine an attorney who has represented a large property owner for decades attempting to also represent a tenant in a dispute in court?  It wouldn’t be possible to represent both parties fairly.  It doesn’t happen. This is the same reason why dual broker representation should not happen.

Every tenant/buyer should hire a broker that doesn’t have any conflict of interest with a landlord/seller or their broker.  The landlord/seller pays the tenant/buyer’s broker’s commission so it costs the tenant nothing.

Brokerage firms that specialize primarily in representing tenants/buyers are a very good choice because they don’t have the conflicts mentioned above.  If a tenant/buyer is thinking of representing themselves –that can potentially be even worse.  Hire an experienced broker who only has your interests in mind instead.  You will save a lot of time, money and headaches if you use the right broker.

How to Terminate a Commercial Lease Early

Many of my clients have stated, “I don’t want to sign a long term lease like 5 years or more because I’m not sure I will be in business that long or might need more or less space.”   My answer to them?  It’s usually in their best interest to sign a long term lease and there are ways to terminate a lease early.

Signing a longer term lease between 5-10 years makes good sense for many reasons.  You normally get the best economic deal that way with lower rent, more free rent and more tenant improvements paid by the landlord.  You normally get more options like renewal options with more time.   You don’t have to worry about moving sooner either or having to pay a much higher rent in 1-3 years if the market rates increase.  Keep in mind that many landlords won’t agree to less than a 5 year term, especially for space in demand where another party will lease it for 5-10 years, so it will really limit your options for properties if you want to do less than a 5 year term.

If you need to terminate a lease early, you have many options available to you.  You can request an early termination option of the landlord in your lease, but most landlords don’t like to grant them.   If they do, they want enough time to release your space so a 6-12 month notice from you might be required.  You might then have to pay back unamortized tenant concessions like free rent and tenant improvements.  But this is still a good option to have if you can get it.

What if you can’t get the landlord to agree to an early termination option?  There are still other good options like having the right to relocate in the project to a larger or smaller location.  You also generally have rights to sublease or assign your lease to another qualified tenant.

If none of the above options work out, then you can still legally terminate a lease in most states like California.  Courts usually require a landlord to mitigate a tenant’s damages.  This usually means the landlord has to take reasonable steps to re-lease the space, but this mitigation usually only starts after you vacate the space –not while you are in it.  However, I have seen most legal awards and arbitrations settle between 6-12 months of rent.  This is generally the most a landlord can squeeze out of a tenant in Southern California.  This can be a tricky matter, so you have to make sure you do it right and use someone familiar with the process like me or a good real estate attorney. You might need both.  But I have been very successful negotiating an early lease termination for my clients.

Contact David Massie for more help:   805-217-0791 or david@djmcre.com

Commercial Landlords and How Their Reputations Affect Leasing

Most commercial landlords that I deal with don’t seem to understand the relationship between leasing their office, retail or industrial buildings, and their reputation in the community.  It’s pretty simple really.  If a landlord has a poor reputation, it will make it harder for them to lease their building spaces.

Here is a prime example.  Before I was a full time commercial real estate broker, I worked directly as the Director of Leasing and Property Management for a large landlord who owned more than 50 commercial buildings. There were many different types of commercial buildings -usually office, retail or industrial spaces.  Before I accepted this job position, I found out that the local brokers whom I knew well and worked with closely did not like working with this landlord -my new employer.  So, I convinced the landlord to let me leverage my relationships with the brokerage community for 6 months to see if it made a difference in our leasing.  Guess what?  In my first year, I negotiated and completed over 125 commercial leases!  This was more than double the number of commercial leases than anyone else that had the job before me.

Another example is when I had just finished acting as an expert witness where I had to go into court and testify that the landlord had ripped off a tenant for over 15 years.  This included millions of dollars related to the tenant’s share of NNN/operating expenses.  Our side won the case.  But the landlord didn’t just lose this case and have to pay my client back for millions of dollars, he also lost the trust of my client going forward and the trust of the other tenants, brokers, attorneys, other people in the community, and so many more.

Think about it Mr. Landlord.  If you treat your tenants poorly, and try to cheat them on their share of their operating expenses or add expenses that aren’t reasonable (even though maybe legally allowed), you are going to have poor relationships moving forward. If you don’t care about their business and working with them in ways to help them do better, have an unfair lease, or don’t check in with them regularly on how they like being a tenant and how they are doing, etc. -then your landlord reputation will hurt your leasing.  People talk.  And they will talk about you not being a good landlord.

My clients ask me all of the time for intelligence on a landlord.  I tell them what I know and when I tell them that a particular landlord is difficult to deal with, doesn’t have a good reputation or has a lease form that is unfair, etc. then many times this client will simply opt to not even consider the property owned by the landlord with a poor reputation.

My advice to landlords:  Treat your tenants like clients and not tenants.  Treat them like you would like to be treated.  You as the landlord many times have the upper hand in so many ways and if you use this leverage incorrectly you are making a mistake.  Tenants are your life blood and you need them as clients not just tenants.

If you are a landlord and want more information on how you can change your reputation, please contact me as I have many ideas on how to do this.  Some of these include calculating NNN and operating expense increases correctly and fairly, fair lease documents, correct property maintenance, and general things that will make your clients (tenants) want to stay in your building and new ones want to lease there.

Contact David Massie for more help: 805-217-0791 or david@djmcre.com

DJMCRE Recent Commercial Real Estate Transactions Update

David Massie of DJM Commercial has been busy lately successfully negotiating commercial real estate deals on behalf of his clients.  Here is a list of just some of the recent commercial real estate transactions completed by David:

Sales:

  • Sale of a 26,000 sf industrial building in Oxnard, CA.

Office/Medical Leases:

  • 11,700 sf medical lease for National Research Institute in an office/medical building in Los Angeles.
  • 5,900 sf office lease for Liden, Nestle and Soden in an office building in Westlake Village, CA.
  • 3,254 sf office for Bill Barry/Mike Anton of Ameriprise Financial in an office building in Woodland Hills, CA.
  • 2,455 sf office lease for the Bensamochan Law Firm, Inc. in an office building in Agoura Hills, CA.
  • 1,200 sf office lease for Griff entertainment in an office building in Encino, CA.
  • 988 sf office lease for Westlake Investment Advisors in an office building in Westlake Village, CA.

Retail Leases:

  • 6,000 sf retail lease for The Open Book in a retail shopping center in Santa Clarita, CA and 5,000 sf lease renewal at The Oaks Mall in Thousand Oaks, CA.
  • 4,775 sf restaurant lease for Amri Cafe in a retail shopping center in Oxnard, CA.
  • 2,940 sf retail lease for Express Employment Professionals in a retail shopping center in Oxnard, CA.
  • 1,600 sf retail lease for a second location for PrideStaff in a retail shopping center in Oxnard, CA.
  • 1,200 sf retail lease for Overall Brazilian Jiu Jitsu & fitness Academy in a retail shopping center in Agoura Hills, CA.
  • 900 sf restaurant purchase and lease for Origin Cafe in a retail space in Los Angeles.

Legal Expert Witness:

  • Acted as an expert witness appearing in court on behalf of a retail tenant regarding a landlord/tenant legal dispute regarding a landlord overbilling the tenant for about $1.5 million dollars where my client prevailed primarily due to my testimony.
  • Acted as an expert witness to successfully settle a landlord/tenant dispute regarding percentage rent for a retail tenant where the landlord was trying to charge the tenant too much.

I want to thank all of my clients for putting their trust in me to represent them.

Remember, because of my past experience directing some of the largest real estate companies in the US, I can really help both tenants and landlords with any of their commercial real estate needs for any type of commercial real estate including office, retail, restaurants, gyms and industrial especially in the area of leasing, buying, selling and acting as a legal expert witness.

Please contact me if you have any type of commercial real estate needs.