Hans Hansson

In today's economic climate many businesses are facing declining sales by 20 percent or more from the time they originally signed their lease. With the prospect that sales will stay flat or continue to decline for the rest of this year and the next, businesses everywhere are trying to figure out how they can renegotiate their budgets to pay the rent. Landlords also have worries in this economic climate. Many are seeing tenants fail or come knocking on their doors for rent relief. Starboard TCN Worldwide offers a new service aimed at assisting business manage rental costs and keeping tenants in place with a lease modification service know as 'Blend and Extend'.

Starboard TCN's commercial real estate professionals set our service apart by taking the time to validate the need for a reduction. Many owners have their leases rates tied to the financing of their buildings so they have little room to work within to assist their tenants through this downturn. However, the prospect for both the tenant and the landlord is worse if the tenant's business fails and they have to vacate the building. We work to provide the necessary information to a landlord to go to their lenders or investors to support such a move.

Who is qualified for a 'Blend and Extend' lease modification? Typically you are a candidate if your firm has seen sales or revenue cut by 20 percent or more. Our real estate professionals will evaluate your business in a variety of ways. Looking at the tenant's ability to pay rent and if the business is financially strong enough to continue business through this down cycle, we will then create a matrix to present to the landlord.

Through our negotiations with the landlord we aim to lower your current rental rate for the period remaining in your lease term to an affordable rent level based on your finances. In exchange we will offer the landlord an extension of your existing term to make up the loss in rent as a result of this reduction. To fill an office or retail vacancy landlords typically have to wait three months or more before a tenant is secured and rent is collected, 'Blend and Extend' eliminates this potential period without rent income for the landlord.

If tenant improvements are required that vacancy could last considerably longer. Landlords also contribute in most cases to tenant improvements have to pay brokers, attorneys, architects and other service providers fees to secure the tenant etc. By extending the lease we calculate possible loss of revenue as part of our matrix that we present to the landlord on the tenant's behalf. This gives everyone the ability to learn that it is in the best interests of both the landlord and the tenant to consider seriously a lease modification.

If you are interested in this service please contact us at 415-765-6900. We would be more than happy to send one of our qualified agents to see if your firm would qualify.

California voters recently rejected state budget measures intended to shore up our declining budget, which has stirred up talk about the need to revisit overturning Proposition 13, particularly with commercial properties. But removing commercial real estate from Proposition 13 protection may have many unintended negative consequences for business owners.

Supporters of overturning Proposition 13 have used Bank of America to illustrate the potential revenue loss to the state of California. They suggest that Bank of America owns many branches that were purchased years ago at rates way below current market value, therefore they are taxed at a rate far below their potential reassessed values. This example is being used to show that there is somehow an inequity that needs to be corrected.

The Bank of America example, however, is misleading. Most Bank of America sites are actually under long-term leases not owned by Bank of America. These properties, like other commercial properties, are constantly being bought and sold leading to property tax adjustments.

Also, for the majority of commercial properties this model is simply not true. Unlike residential real estate, commercial properties tend to trade hands far more often thereby automatically readjusting values for tax purposes. Commercial properties require constant upgrades and tenant improvements to meet the requirements of new tenants. Every time a commercial property owner files for a building permit the cost of these improvements triggers a reassessment, effectively offsetting the effects of the Proposition 13 tax shelter.

In addition, commercial property taxes are not typically paid by the building owner but by the building tenants. Retail NNN leases have the retailer paying these taxes. In office buildings, the tenants pay any increases over a base year for property taxes. With our economy in such a poor state the last thing that retailers and businesses need is the pass-through of more taxes.

I believe that Governor Schwarzenegger said it best, "the voters have spoken and they are not interested in any tax increases". What government should focus on is spending more time living within its means rather than burden our already weak economy with more business taxes.

"No", arguably the most important word in the world. The use of the word "No" has had the most important impact for all us personally as well for everyone as a whole. "No" has lead to wars, has lead to personal failure, and has lead to lost opportunity. It has held us back and it continues to prevent us to succeed. "No" is easier to say then yes and therefore in the "ying and yang" of life it appears that it keeps us off balance.

Some people automatically say "No". My mother for instance says "No" to any opportunity first. "Mom do you want to go out today?" "No". "Mom do you want to consider this way to do it?" "No". But in my mom's case as well as many, using "No" as their first answer means they are really looking for a yes. They want to be convinced that yes is the right answer and are waiting for someone or something to convince them to say yes.

"No" is also not always a negative. It can be a positive. Take football for instance. You play offense to score, you play defense to prevent a score. Yes you want to score when you play offense and "No" you don't want the other team to score when you play defense. "No" in this case is a positive decision.

"No" can appear to be the right decision sometimes and you can convince yourself that "No" is a positive move. Yet, the decision to say "No" could have very bad consequences. Take the San Francisco Giants decision to say "No" to trading Gaylord Perry for a young up and coming rookie named Steve Carlton instead of their ultimate decision to saying yes to trading Perry for "Sudden Sam" McDowell. Perry and Carlton ending up in the Hall of Fame. "Sudden Sam" proved not to be so "Sudden" and didn't last more than a year with the Giants.

Working in sales, we know that if we make 100 cold calls, that in order to get two yeses, we have to hear "No" 98 times. But successful salespeople look at "No" differently, they look at "No" as "yes is around the corner". They look at "No" as a challenge to get a yes. They know that if they continue to work on people that say "No", eventually they will say yes.

One of the most important decisions I learned from my salesman Dad occurred when I made the sales call with him as a teenager. My Dad was all about servicing a client but his idea of servicing a client crossed way beyond just serving his product it was assisting his clients in whatever they needed whether it related to his product or not.

My dad was a manufacturer's representative and handled a number of different food related products selling to vending machine operators. One early morning, we visited a customer and my father pitched the idea to have this customer switch his current coffee brand to my dad's. My dad obviously had made this pitch a number of times before without success but this time the customer said yes and would order. Soon after, the phone rang and this customer had a major problem with a series of vending machines that were down in an important client. His mechanic was not able to fix the vending machines and the client was extremely upset. My dad immediately volunteered to help, which he did quite regularly. It took the entire day but my dad by himself helped get the machines up and running again. When he returned to his customer's office expecting to take the order they had discussed earlier that morning, the customer said, "Thanks for helping us today. However, while you were gone, the current coffee vendor came in and we gave him our order. So "No" we will not be switching coffee brands at this time."

That "No" was devastating to me. I could not understand why my Dad did not go into that customer's office and punch the guy. I asked my Dad if he were mad, he looked so calm. "Dad why did you take that?" I asked. His respond was something that I have never forgotten, "Son, we will get them the next time, he will eventually say yes." As it turned out, the customer eventually did say yes and my dad had their business for a number of years later.

Salespeople cannot exist with a negative "No". They can only exist with a "No" that will lead to a positive yes. See how you use no in your life. It has such powerful consequences on how you deal with it.

In good times with lower vacancies and higher rents, the importance of providing the highest standards of property management is not always emphasized. In fact, in a recent poll of commercial landlords the majority felt that property management firms were overall not very good. Some of the things that were pointed out were: the revolving door of property managers that came and went through their projects; lack of flexibility in accounting reports; poor follow through; lack of competing bidding on repairs and projects; and, mistakes made in operating expense pass-through calculations.

Several landlords note unless you were a large REIT that the larger commercial property management firms treated them with less service overall.

This coming year will offer many challenges to building owners such as higher vacancies, less revenues and tighter credit standards. To compete for a smaller amount of tenants, buildings will have to "shine" to win these tenants. That means from the lobby on up buildings will have to remain modern, clean and attractive while landlords have fewer funds to upgrade. Buildings will have to offer personal attention to their tenants to insure that they work with their tenants to survive these difficult times. They will also have to insure that they pass on all costs that they are legally able to pass on to insure maximum revenue.

To meet these challenges property management companies will have to change the way they do business. They will have to invest in better people; more supplicated software and provide more personal rapport with clients.

In order to meet this challenge, Starboard TCN Worldwide and Westlake Realty have formed a new company StarWest Property Management Services. StarWest combines two independent firms to provide personal leasing and management services with top-notch software applications. Westlake Realty has been providing property management services since 1972. In 2007 Westlake won the Northern California Property Management of the Year award. Westlake manages over 500 million dollars worth of real state throughout the Western United States. It offers a personalized financial application system that allows a landlord absolute review of everything that goes on with their property in a paperless world fully tailored to how the owner wants to view this information. It offers GPS technology to insure that support is provided and delivered as quickly as possible. It has long standing management staff that stays with a building.

If you are interested in learning more about StarWest please visit StarWestRealty.com or call us at 415-765-6900 for a free review of how we can handle your property management needs.

As a commercial real estate broker this is my third down cycle that I have experienced. In each of the others the pattern to recovery was the same. People would lose their jobs, could not find new jobs and decided to start their own businesses to survive. The point of entry for many is to go into retail opportunities.

In November of 2007, San Francisco passed an 11-store chain rule. If a retailer has more than 11 stores anywhere in order for that retailer to be able to be allowed to go into a neighborhood they would have to go through a public review process. This is lengthy process with no assurance that the retailer will receive approval. As a result potentially successful neighborhood locations could be available for these start up retailers except for other restrictions that the city has in place that actually creates serious barriers to get through.

If a proposed retailer finds a location they cannot simply rent the place and move in. First there has to be a determination as to whether their use is considered a change of use. If it falls as a change of use then that retailer is subject to a similar lengthy review process with no guarantees of approval. In addition the retailer has to hope that the landlord will wait up to six to nine months to get approval without rent which makes the prospect of succeeding in securing a retail space even more difficult and costly.

I have a 1,200 square foot retail space for lease for a local landlord. They are anxious to lease the premises and are willing to negotiate a fair deal to get it leased. We have had numerous small business owners that have expressed serious interest to put in food type retail in this location. When they go to the building permit department we typically do not hear from them again because they immediately become discouraged at the process. We next attempted to secure an architect and an attorney that specializes in zoning issues for these potential tenants. The cost to hire them run between $6-9,000 with no assurance of success paid up front. Any retailer that starts this process is looking at 6-9 months to secure necessary approvals and building permits. Next, they have to account of construction time after receiving permits, which could take another two months. A retailer today could be a year away from opening their doors. This kills any opportunity for a small business to get started and puts further pressure on people who are only seeking a way to survive in these difficult times. This does not include the loss opportunity landlords have to secure rent. This long term will mean lower property values which means less property tax paid to the city.

San Francisco needs to create a streamlined approach to securing approvals for retailers now. The city can create a fast track system that will provide real assistance to get retailers up and running quickly. There is no reason why a small 1,200-foot retailer cannot find out whether he can occupy a space in less than 30 days. The city needs to create more jobs and real opportunity for its citizens not roadblock them. All you have to do is drive down most retail streets in our city and you can see the effect of vacant stores on the remaining businesses that are trying to make it. Lets get the city to help get these spaces filled.