Millennial Insight on Retail

For most, it’s easy to think of a millennial as a teenager with a phone attached to their hand or constantly binge-watching Netflix shows but the reality is that this generation is growing up and so is its retail habits. The most important thing to realize about this generation is the great diversity within it, primarily with its age range. It includes anyone born between 1978 and 1995, which means the oldest millennials are roughly 40 and the youngest are 22. This is a large gap that encompasses many milestones. As a millennial on the younger side and a college student, I have much different spending habits than someone born more towards the beginning of the generation who is in their 30s, perhaps married with children. It is important for retailers to focus on catering to all sides of the spectrum. As more and more millennials are starting to make the shift into the majority of the workforce and consumers, retailers should understand and re-evaluate where millennials’ shopping habits are currently. By doing so, this can help qualm some fears and anxieties about the future of retail to tenants and investors. For more information how generations have affected and adjusted to the industry, click here.

Online Shopping

While the convenience of a mobile platform is paramount to millennials, it is not the only reason they keep gravitating more towards cyber-retailers; it’s simply the best way to see what is available on the market. As established, a lot of the generation’s time is spent online, and in particular social media sites. Naturally, some profiles stand out more and the owners of these accounts have now become known as “social media influencers”, the use of which can be crucial for a lot of retailers. To give an example, there are many influencers, which also include bloggers and vloggers, who demonstrate or try on their purchases in picture or video format. They often link where to buy the products or tag companies, making the purchasing process very simple as well as giving exposure of the brand to thousands of people with just one photograph. It can be seen as virtually trying on or testing products. However, social media is also a proponent for why millennials still go out to get one thing they can’t online: experiences. Well, that and no shipping prices.

Experiences Matter

With cost of living and student debt constantly rising, it is no wonder why millennial spending habits are adjusting. If there is an opportunity to spend $20 on a new top or trying a new restaurant, most would choose the latter. This is true for a few reasons, one of which being its correlation to social media. You can post via various apps where you are and what you are doing to showcasing to friends your experience and awareness of what is “cool”. Going out also allows for social interaction and promotes the popular wellness of the work-life balance. If most of one’s spending money was spent on material items, it wouldn’t leave much to spend with friends and activities. Since a lot of millennials’ time is spent online, human interaction is crucial to social life. This is why restaurants, bars, trendy workout studios, and activity centers have been left undisturbed by the “retail apocalypse”.

The other reason for shopping brick-and-mortar is the fact that it is a leisure activity to partake in. Though we like to buy online, there is something far more gratifying to have a product immediately —another defining quality of the generation. Personally, if I have time, I greatly enjoy just wandering down each aisle touching, feeling products, reading labels and being around other people doing the exact same. Additionally, shopping itself can be seen very therapeutic. Studies even show that “retail therapy” can been a useful strategy in trying to improve one’s mood [Atalay, Meloy]. Retailers can use this as an advantage by making the shopping experience cater to consumer’s senses – free samples or demonstrations, a distinct smell in the store, live music or other events on weekends, etc.

Ethical Spending

For a long time, the biggest fad was trying to constantly discover the next fad. However, recently there has been a slight decline in materialism. There is a large emphasis on ethical buying and natural products. People are becoming more engaged in politics, cultural, and societal issues which can translate to their purchasing habits. For example, some shoppers may be less likely to buy something from stores that partake in child labor, support certain politicians, or fire people in favor of machine automation. Millennials are less likely to spend money unnecessarily but when they do spend, they prefer to give money to brands with positive and sustainable business ethics, even if that means shelling a few extra dollars. The graphic below [] showcases that majority of the generation’s expect more of large corporations than just the products they provide.

In conclusion, there are several more aspects that retailers should be taking into consideration when designing products and services toward millennials. While stereotypes of the generation may exist for a reason, some are quite outdated and creating marketing tactics towards them will not benefit the producer or the consumer. Tapping into what current trends or habits are occurring could mean tapping into a larger potential and profit.


Boomers and Millennials – How Two Generations are Transforming Retail

Contrary to popular belief, internet retailers are not the sole drivers behind the closures of some of the most iconic retail brands of the last 50 years. Brand names such as Sears, K-Mart, JCPenney, Macy’s and Sport Chalet are shuttering their doors because they are struggling to transition from how the Baby Boomers shopped to how the Millennials seek to experience shopping.

Plain and simple – I’m tired of hearing how this is the end of retail. I don’t believe that power centers will become distribution hubs and that “bricks and mortar” retail will continue to die a slow death. Instead, what I see is a paradigm shift from the way we looked at the lost art of retail to how the next generation is transforming the way we experience shopping altogether. In order to understand how shopping centers are retailing we should look at how the Baby Boomer generation once influenced retail and how the Millennials will now transform the retail industry.

The Boomers

8,000 new shopping centers were built throughout the 1960’s and 1970’s in response to the tremendous demand from the Baby Boomer generation (born in between 1946 to 1964). It is no coincidence that K-mart, Walmart, Kohl’s, Rite-Aid and Target were all born in 1962, followed closely by Best Buy, Crate & Barrel, Gap, Petco and Pier 1 Imports. The Baby Boomer consumers were largely white, middle class children from a two-parent single income home and, broadly speaking, liked the same stuff. This made it extremely easy for retailers to cater, predict and deliver on consumer demands.

In fact, the demand was so great that creativity gave way to production to satisfy the consumer and nobody complained. As the Boomer joined the workforce and started to have families in the suburbs, developers and retailers responded by building large format or “power center” shopping centers. These power centers attracted “Category Killer” tenants such as Walmart, and Home Depot, that could deliver products cheaper and at a massive scale. This tremendously affected the traditional mom & pop retailer that could no longer compete with prices. In Doug Stephens’, book The Retail Revival; he calls this period the Industrial Devolution; a period where retailing ceased to be a craft and became an occupation. The new era would bear witness to the displacement of personal service, unique products and artful merchandise by stack-outs, blowouts and rollbacks. Quality would take a back seat to availability, and abundance would triumph over substance.”

Between the years of 1980 to 2005, when the Baby Boomers were at their earning prime, the US economy grew 100%. This growth concluded with the great recession of 2008.

Now, almost 10 years after the great recession and 55 years after the last Boomers were born, most Baby Boomers are past their earning primes but are still holding on to executive level positions while shifting their disposable income from retail consumption to travel and health care. Retailers are still slowly recovering from the recession but must now adapt to new consumer demands generated from the largest generation since the Baby Boomer: the complex and diverse Millennials (born between 1981-1997).

The Millennials

Millennial consumer demands are a 180-degree turn from the Baby Boomers. Unlike the vanilla Boomer, Millennials come from various cultures, ethnicities, educations and socio-economic status. This dramatic shift in consumer tastes is proving problematic to the various retailers that have not adapted to the new wave of demand led by the Millennial consumer.

Why should every person involved in the shopping industry care about Millennials?

Because they are the largest generation in U.S. History and have a higher net worth than any previous generation according to a Forbes Magazine article written by the CEO of ICSC (International Shopping Center Council), Tom McGee. Forbes Magazine states that 14% of them already have a net worth above $2,000,000 and they have not yet reached their prime working and spending years. They are spending more money on entertainment and dining than any other generation. And as a whole will allocate a lot more of their disposable income towards “experiences.”

“It’s not that we are lazy,” states Marisa, our 22-year-old marketing intern, “we just take pride in figuring out how to make things work for us quickly. It’s called “Life-Hacking”. Marisa is the ideal millennial to provide me with insights into their purchasing rituals. She just completed all the courses for her bachelor’s degree at the University of Southern California but instead of heading into the workforce, she is opting to stay an extra year at USC to complete her Master’s Degree.

Here is what I learned from Marisa, and what retailers will need to learn in order to prosper.


Most of her time is spent online and it bleeds into her shopping habits because she follows bloggers who demonstrate or try-on purchases in picture or video format. If she decides it looks good on them and she wants to try it on, she buys it. The bloggers will link where to buy the product, making it convenient for her to click on the link and make the purchase.


For a long time the biggest fad was trying to discover the next fad; however, she has recently noticed a decline in materialism and a large emphasis on ethical buying. Her peers are more engaged in politics and cultural issues, which means that they are less likely to buy something from stores whose values are not aligned with theirs.


With limited disposable income, she will choose to spend $20 towards trying a new restaurant over buying a new top. She will pick the restaurant for the following reasons: a) she can post about it on social media, b) she can discuss her experience with her friends and c) it allows her to have social interaction. Since she spends most of her time on online, she cherishes the opportunity to spend time socially with friends. She will admit that the majority of her disposable income is spent on eating, drinking, Ubers and gasoline.

When it comes to actually going shopping, she only goes if they accept credit cards over cash- since it is very rare she has cash. She will rarely visit a shopping center but when she goes, it is because of one of three things; a) it is for a very specific item, b) there is a coupon involved or c) the EXPERIENCE. She enjoys going to Target because it is therapeutic. She will venture into stores to try clothes or make-up if time allows for it but will rarely purchase an item.

For more detailed information on the shopping habits of Millennials click here.

The difference in retail habits between Baby Boomers and Millennials provides a perfect case study for the premise that retailing is not dying a slow death, it is simply evolving to meet the needs of the new generation. Those retailers that understand and capture this new customer will thrive.

The Baby Boomers led the way in consumerism and retailers responded with big boxes, mass quantities and “low” prices. Millennials are bringing back the lost art of retail, by demanding an experience, convenience, quality and purpose. We will see over the next few years which retailers will meet these demands and which ones will fail to catch up with today’s main consumer.

What the California Legislation on Dual Agency Means for You

When the discussion of dual agency occurs, commercial real estate practitioners may rarely think of its implications. However, dual agency involves all parties including sellers, buyers, landlords, and tenants of both residential and commercial properties. California currently allows dual agency, so long as it is disclosed to the parties involved: a broker can represent both sides in the transaction. Some states, such as Colorado, Kansas, Florida, and Wyoming, prohibits dual agency; many others follow along the same lines as California. Recent proposed legislation by Assemblywoman Lorena Gonzalez, D-San Diego, could change that and the way we transact.

What is Dual Agency Legislation?

Assembly Bill 1059 was introduced by Gonzalez and would prohibit a brokerage firm or its licensees from acting as a dual agent. This impacts the entire brokerage firm. If passed, this would mean that Colliers International as a firm couldn’t act as a dual agent for both a seller and a buyer in a transaction, even if the buyer was represented by an agent in a different office.

In January 2015, Senate Bill 1171 was passed requiring disclosure of dual agency and agency relationships in a commercial property transaction; residential transactions already had this practice in place. The bill was also introduced shortly after the California Supreme Court ruled unanimously that a real estate professional representing a seller on a residential home purchase owed a “fiduciary duty” to both parties if the buyer’s agent works for the same brokerage. The ruling stated, “It is undisputed that Coldwell Banker owed such a duty to the buyer. We now conclude that the associate licensee, who functioned on the Coldwell Banker’s behalf in the real property transaction, owed to the buyer an ‘equivalent’ duty of disclosure.”

Varied Opinions On The Bill

Some proponents of the proposed legislation come from the commercial real estate community. Hughes Marino, CEO of a San Diego based tenant representation firm, believes this will provide more transparency. According to CoStar, Hughes states, “prohibition of dual agency would truly level the playing field for tenants offering them legitimate transparency and conflict-free representation.” Opponents believe the bill is too extreme and could change the commercial real estate industry in California. Another bill was introduced AB 1616 by Assemblywoman Jacqui Irwin, D-Thousand Oaks, where instead of banning dual agency all-together, expands current disclosure requirements. Both bills coupled with the Supreme Court ruling show evidence that there is increased focus on the consumer, to limit both potential conflicts of interest as well as increase transparency.

While AB 1059 does have some hurdles such as going through committees, the Assembly, and State Senate, before being sent to the governor, there is no doubt that this could cause disruption within the real estate brokerage community, especially among larger firms, and can certainly impact future real estate deal making. Brokerage companies, agents, as well as clients will need to pay close attention as the bill progresseses.

For more information on AB 1059, please visit: California Legislative Information.

How Leasing Agents Can Create Value In The Sales Process​

As a commercial real estate broker specializing in the sale of shopping centers, I value the relationships that I have built with retail leasing agents over the years. In fact, my early mentors were mostly leasing agents and I have shaped much of the style I use in selling shopping centers with what I have learned from retail leasing professionals. This is why it bothers me when I witness missed opportunities, such as when a property​ owner decides to sell a shopping center and the leasing agent does not get included in the sales process.

Leasing Professionals; The Unsung Hero

Leasing professionals are at forefront of value creation, from assembling the right mix of major tenants for the shopping center to persistently finding the right tenant for that last, hard to lease, space. The leasing agent is the unsung hero that grinds out the lease negotiations to stabilize the property’s income stream however, when the landlord decides to sell the Property the unsung hero often gets overlooked from participating in the sale. This prohibits leasing professionals from earning a well-deserved fee from the sales commissions.

In most instances, property owners value the leasing professional for a reason, and it is tough to be an effective leasing person and handle sales transactions. This is where collaboration with Investment Professionals, like myself, will yield leasing agents well-deserved dividends from their labor. If this sounds self-serving, it is! I want to team up with leasing agents to help them earn a commission from the projects they leased. I am an investment sale professional with a 23-year record of selling shopping centers. That is all I do! I have an experienced team and collectively we underwrite position, distribute and effectively negotiate a shopping center sale, but I always need the local trade area knowledge and first-hand experience with the subject shopping center and its leases. This is where teaming up to drive value to the overall transaction will be the most effective.

Partnering on RFPs

In one of my most successful partnering scenarios, I collaborated with a leasing professional from another large brokerage company. They wanted to collaborate on a response to a request for a proposal to sell two shopping centers across from one another.​ The ownership was a New York-based institutional fund adviser whose clients had owned the property for close to 20 years. My partner, on the transaction, had been leasing the property for close to 10 years. He chose to reach out to me because he did not have anyone at his company with the proper experience to sell a shopping center. Even though it is unconventional to collaborate with different companies in the sale of a project, there was a compelling reason why it made sense for us to team up for this assignment.

Our team had recently completed the sale of similar projects and the leasing agent had a long history of leasing the property with a strong familiarity in the trade area. He had already completed leasing the remaining available spaces to stabilize the income stream, and felt that there was still more value when some of the short-term leases expired and the spaces were either r-leased or renewed. This presented a valuable story to potential investors in order to maximize value for the property.


Our team collaborated on the proposal presentation and beat out two other sales teams for the business, the combined team of leasing and investment experts was the difference maker.

During the marketing process our collective team was able to handle several objections from investors who questioned our leasing assumptions. We were able to demonstrate intimate familiarity with the trade area and highlight appropriate comparable lease transactions. We also proved strong tenant demand by producing LOI’s from perspective tenants.

We ended up completing two transactions, one tailored for a strategic ownership of the remaining shop spaces to the main grocer tenant that already owned their parcel and the second to a value seeking syndicator who had investors in an exchange. If the leasing agent who had worked for almost 10 years to add value to the property would not have reached out to our team they would have missed the opportunity for a sale and the ownership would not have yielded such positive results.

Opportunities to form partnerships between investment and leasing agents come in many shapes and forms. They may not always be appropriate but if you are an investment agent and the project requires the hands-on knowledge of the leasing agent or if you are a leasing agent and the project requires the technical experience of an investment agent, the combination of experiences will produce outstanding results.

If you’d like to learn how we can help you, contact us here​:


Understanding the Buyer for Your Shopping Center

Winning the business is half the battle. Marketing the property with a comprehensive and precise marketing campaign therein lies a greater challenge. If positioned incorrectly, the property will not sell, the marketing methodology becomes diluted, a team loses credibility, and a long term relationship could be lost.

Sellers want to feel confident that their property will sell, quickly, and that they are working with a team that has proven their ability to properly position a property on the market.

Typically, marketers and teams will focus on external elements such as a property’s location, tenancy, and pricing metrics to formulate the overall marketing strategy and positioning. Our team tends to work the other way. Our analysis of the property goes deeper and into the minds of different buyer profiles. Our buyer becomes “ground zero” for all positioning and marketing methodologies.

The key to precision is positioning the buyer, not the property.

Understanding Your Buyer

The key to properly positioning a property is understanding the buyer and their corresponding risk categories. The higher the yield on a property; the higher the risk.

When our team is awarded a listing, we use the chart below to define the different categories of buyer profiles and their corresponding risk categories. We look at where the property would fall within this chart and begin from there.

What Next?

Once our buyer and risk category have been established, our marketing materials seamlessly fall into place.

Specific buyer profiles lend to specific styles. Let’s say a property falls within the Fund Adviser bucket and a trophy property (Q3). Our team would create a financially driven offering memorandum, with less imagery and more substance. In this case, we are speaking to industry professionals that are looking for exact information and specific terms. They are clear with their requirements and the marketing materials are then focused on messaging that resonates with those buyer profiles​.

If we were catering to a profile in Q1, the offering memorandum and materials would be a little more vibrant and picturesque. We would include information that would emotionally drive a buyer in this quadrant to feel confident in the possible investment. At times these investors are also more drawn and sensitive to regional connections, tenants, and the inherent narrative and nuances of a property. Since these properties might pose higher risks than those found in other segments, our marketing materials would have to lend to those characteristics.

The Art of Positioning

The art of property positioning lies in the ability to translate the raw property data to our property positioning rubric. Decades of experiences have provided our team with the ability to analyze subtle nuances, analyze the projected yields, as well as the long term viability of the potential investment.

Of course there are outside factors that can also change the effectiveness of positioning the property based on a certain buyer profile. We have had instances where the market has shifted during a marketing campaign, changing not only the buyer profile but also the content of our marketing materials, and at times, creating a whole new set of marketing materials.

Above all, being artfully adaptable is the best way to complement experience. For more information on our proven process, or to find out where your property is on our chart, contact us here:

Bringing Technology To Market

Baking a pie takes precision and strategy, a careful measure of all the ingredients creating the perfect formula. The pie crust needs to be the right consistency and bake to support the filling. Timing becomes the catalyst to perfection. Thankfully, today’s modern technology has supplied digital scales, timers, and thermometers that have taken away most of the guess work, providing many with the tools needed to achieve culinary success.

Marketing for commercial real estate has also experienced similar advances in technology that measure campaign metrics and provide the data to help perfect one’s marketing methodology.

Our team has learned to lean on much of this technology to build our marketing process and ensure both precision and efficiency.

Digitize all Materials

Most of our materials are now digital.  Although we do make printed collateral for our team marketing, we always accompany each piece with a digital version.

Digital Materials not only help track open rates and additional metrics, it also allows for incorporating interactive elements that are not traditionally utilized in the industry. As a marketer for Lagos Shopping Center Advisers, I push our team to breathe new technological innovations into our campaigns. No longer are the days of printed collateral, mailers, and faxing. Everything needs to be instant and easy to access.

Our team utilizes a few platforms to ensure investors can access the property marketing materials immediately – our go-to being Real Capital Markets (RCM). Their user friendly interface not only allows for immediate access, its aesthetics are sharp and the platform is easy to use. RCM also provides our team with real time alerts letting us know when someone has accessed the marketing materials.

Drone Videos have also been a great way to bridge the gap between antiquated marketing campaigns and innovation. Our team creates a video for every property we market and we make sure to utilize the newest trends in video editing and animation.

Tracking Metrics

Tracking the effectiveness of marketing campaigns is one of the most distinct benefits of leveraging technology for commercial real estate marketing campaigns. Metrics are essential to any marketing campaign because they show whether your marketing efforts resonate with your target audiences.​ This not only helps us make adjustments to current campaigns, it also helps us streamline future campaigns.

With every new campaign innovation there is a huge curve for learning. A wonderful example of this was our team figuring out the appropriate length for a property video. Metrics helped us find that most videos should be no longer than one minute and ten seconds. We learned an important behavioral pattern, specifically how much time our audience wants to spend watching a property video.

Not only are metrics important to us, they are important to our clients. And, technology allows us to accurately provide that information. Our clients want to know that we are correctly positioning their properties by showing them how many people watched the property video, how many people opened up an email from our marketing campaign, as well as how many people downloaded marketing materials throughout the campaign. These metrics provide valuable benchmarks and also help us re-assess a marketing campaign if the numbers just aren’t reaching our expectations.

Timing Is Everything

Timing really is everything with commercial real estate marketing campaigns and technology is a wonderful tool in helping our team find a campaign’s rhythm.

Because most of the platforms we use give us detailed metrics, we are able to see what time of the day works best for sending email campaigns, and even if a campaign is losing steam.

Technology goes hand in hand with all of our marketing campaigns and we are always looking for new ways to provide our clients with the highest quality possible and the most effective marketing campaigns.

ARGUS Enterprise: Warp Speed Ahead

While change can sometimes be worrisome, ultimately, newer software models have proven to be helpful. For instance, can you imagine being stuck using Windows 2000 in today’s world and having data storage in MB rather than in GB or TB (as is the case of my external hard-drive)? Or imagine hiring a programmer who only knew C++.

The latest software upgrade to the ARGUS platform is entering into the repertoire of commercial real estate professionals, known as Enterprise. While many companies have been hesitant to switch over right away in favor of keeping the older DCF model, the latest announcement from ARGUS includes ending its support of DCF licenses on June 30, 2017. Also, since I began teaching the program at UCLA Extension in 2015, many universities including UCLA Extension have no longer provided instruction in DCF. Although ARGUS has stated it is “committed to working with [customers] to ensure a smooth transition” many professionals have been concerned about how this shift will impact the commercial real estate arena.

In order to help better prepare you for ARGUS Enterprise, here are a few key changes:.

User Interface

The first notable change is the user interface within Enterprise. The look and feel of Enterprise are meant to be intuitive for Microsoft Office users, with some semblance to Excel. Many of the entries, like in the Rent Roll tab, populate various rows, tabs, and drop-down options. You are also able to scroll and create multiple row entries. The language and terminology between DCF and Enterprise in many situations remain relatively unchanged; however, the method of entry provides more options, easier flow, especially for more complex modeling situations.

Reporting Options

In the DCF model a user can export the entire file into an excel document. With Enterprise, this feature has been modified. There are now many reporting options in Enterprise – more than even one user may even need, so the ability to export everything into Excel is a bit more difficult. Valuation Reports alone has eight options, and Tenant Reports has nine. Instead, you can export an individual report to an Excel or PDF file. Some users have the option of creating “Report Packages,” depending upon the license, which combines several different options together into a customized Excel or PDF file.

Complex Recovery Structures

While creating complex recovery structures isn’t new, Enterprise has made it a bit easier to see what exact expenses have been included into the expense pools, as well as if there are any detailed items such as administrative fees, or capped costs individually by the tenant.

IRR Matrix

One of my favorite updates to Enterprise is with the IRR Matrix table, found under Valuation Reports. After basic inputs are made, such as purchase price and entry and terminal cap rates, a user can easily see the IRR table for the analysis period and also make immediate adjustments if necessary.

File Exporting

Enterprise allows the ability to export the property file to a DCF file format, which is “.sf,” so even though you may be working off Enterprise, a group still using DCF can review your file. Keep in mind, however, that due to it being simply a different program, there may be variations in the cash flow and valuation results. A warning message will typically pop-up requiring the user to agree to this.

Automatic Saving

Unlike DCF, Enterprise doesn’t automatically save every change you make, which can be both a positive and a negative. One of the biggest complaints of the DCF format was trying to model different scenarios: you would have to save the original file separately. In Enterprise, you can make changes to the scenarios (such as changing the entry CAP Rate or Analysis Period) to see how this would affect the model, without having to keep the change if you didn’t want it hard-coded. This is a great way to see the updates in a live setting.

While migrating or changing to a new platform is never without trials or errors, many groups have already been making the switch or are at least easing into the new model. And, Enterprise has already made a variety of software updates. When I first started teaching at UCLA Extension, we used 10.0. The latest model version 11.6 was released in April 2017.

Of course, at Shopping Center Advisers we are here to help with your commercial real estate modeling needs and are equipped to handle any complex scenario using the latest and greatest technology.

Contact us here:

Shopping Center Advisers | The Lagos Team | Getting Your Documents Ready for the 21st Century

Getting Your Documents Ready for the 21st Century

Shopping Center Advisers | The Lagos Team | Getting Your Documents Ready for the 21st Century

The acquisition days of getting a large box of due diligence files are almost long gone, just as the days of the “floppy” drive and CDs. In fact, my own laptop no longer has a CD portal: our world is progressing rapidly to leverage technology platforms and Commercial Real Estate is no exception. Research has shown that digitizing documents saves both time and money. For instance, instead of wasting time looking for paper files and then spending money on mailing costs, you can find exactly what is needed and send them to the appropriate parties almost instantly.

And further, having key documents not readily available can actually hinder the transaction process and potentially delay escrow. If there is a missing lease file and the Buyer is coming to the end of his or her due diligence period, as an example, it is likely that there may be a request for an extension, or a potential re-trade if that missing file contains terms that can materially impact the economics of the deal.

A missing file can be easily avoided earlier on in the process with digitization. To help get your files ready for a property disposition, here are three key tips.

Document Scanning

Prior to positioning the property on the market, ensure all your files are not just collecting dust in a large storage unit or filing cabinet. There are many state-of-the-art scanners. Or, if you would rather have someone else perform the heavy lifting, document scanning companies can provide efficient services. A centralized storage system can decrease issues where files may be stored in different physical locations.

Sharing Files

Dropbox, Google Documents, and SharePoint are examples of free and low cost solutions that are user-friendly and accessible to anyone given the appropriate links and permissions. You can upload the files and send them to the Listing Broker or the receiving party within a matter of minutes. Even mailing a USB Drive is now considered a less efficient method of delivering materials. The benefit is truly accessibility. The files can be accessed anywhere at any time – even by a busy buyer while traveling away from the office.


Having a clear and concise method for organizing files is also helpful. Once the files are scanned, a system of creating folders such as “Leases” for all lease documents and “Reports” for all third party reports will enable searchers an easier time going through the documents. A concise method can also decrease the likelihood of confusing files or errors. Real Estate companies have often multiple properties and large amounts of documents that can become misfiled if not properly organized.

Avoid having a missing file delay your property from hitting the market, or causing escrow delays. And be sure to connect with your Shopping Center Advisers to help make file coordination as smooth as possible and get your property ready for the 21st Century.

Lagos Shopping Center Advisers can help make due diligence organization and coordination a smoother process, just get in touch with us.

Shopping Center Advisers | The Lagos Team | Top 5 Underwriting Mistakes in Commercial Property Transactions

Top 5 Underwriting Mistakes in Commercial Property Transactions

Shopping Center Advisers | The Lagos Team | Top 5 Underwriting Mistakes in Commercial Property Transactions

We’ve all been there, staring at an offering memorandum or Excel Spreadsheet wondering why the numbers aren’t matching exactly. Or somehow a tenant’s actual base rent doesn’t quite match the Rent Roll. Many underwriting mistakes happen not intentionally, but rather through a variety of distribution channels. Understanding the economics of the real estate transaction is an essential part of the deal for all parties involved including, buyers, sellers, and agents and brokers. And when there are mistakes in the underwriting, it can affect pricing as well as the smoothness of the transaction. Even with a well-trained eye, mistakes do happen.
There are five common mistakes than can be alleviated to help your next transaction process with ease.

1. Valuation Timing Doesn’t Match Current Rents

As tenancies often have rental escalators the current rent maybe slightly higher or different than when the property was first placed on the market, or when the Rent Roll was prepared. Shopping Center Advisers (SCA) tip: ask for a current and updated Rent Roll to verify rents.

2. Property Taxes Aren’t Updated

There are many states that reassess the property taxes upon the sale of the property (such as California). However, the operating expenses can sometimes reflect the ownership’s current property tax amount, which can be lower especially if the property has not traded for many years. SCA tip: recalculate the property taxes as needed and verify the percentage rate.

3. Not Getting Leasing Updates

There are often moving parts with tenant leases, for instance, a tenant may be in the process of exercising an option (extending). Or, a vacant space may have an offer to lease. These timely updates can significantly impact the valuation of the property. SCA tip: inquire about any and all leasing updates.

4. Assuming ARGUS is Flawless

We would all like to think that technology is perfect; however, like most programs, the information exported is only as good as the information inputted. ARGUS is an intricate platform and one minor change can trigger a wrong calculation. For instance, having the rent show as $/Month (amount per month) instead of $/SF/Month (amount per square foot per month). SCA tip: check the ARGUS run against the Rent Roll.

5. Not Reviewing Specific Lease Clauses

One paragraph can change the entire economics of the deal. For instance, if a Big Box retailer has the right to terminate the lease early or is not responsible for paying their portion of the property taxes. SCA tip: ensure that the entire lease and any subsequent amendments are read in its entirety.

Paying close attention to these five underwriting mistakes will help you analyze the deal while minimizing some risk. With especially large transactions, it is helpful to have many eyes looking at the deal and determining appropriate procedures. As such, besides having an in-place analyst and acquisitions team, ask your real estate professional as well as third party vendors for a review. The more thorough the underwriting review process, the less likely to have avoidable errors.

5 Battle Tested Ways to Avoid a Re-trade

Caveat emptor (let the buyer beware) is the contract law principle that controls the sale of shopping centers. Buyers must conduct their own due diligence, and in many times these investigations lead to the discovery of discrepancies from what they thought they were buying. When this happens, the buyer will come back to the seller and seek a “re-trade” which is slang for a price or term adjustment to the contracted price to make up for the discovered discrepancies.

In 22 years of transacting shopping centers, I deal with re-trades almost on a daily basis, some are justified, but many are not, and others are un-avoidable. However, the majority should have been prevented altogether.

Much like watching a crash between two vehicles on a highway, I often find myself being witness to an avoidable collision course between a buyer and seller that ends up in a dead deal. Shopping center owners can be attentive operators of their property but can be careless sellers.

#1 Order your third party reports now.

Buyers, during their diligence period, order and pay for third party reports that include, but may not be limited to, environmental reports, physical inspection reports, roof reports, and ALTA Surveys. These reports never come back clean and it sets the basis for a classic re-trade. Let’s face it, the roof and HVAC systems only have a certain life, the property condition is never without capital improvements, and if your shopping center has been around a while, there probably was a dry cleaner tenant that contaminated the ground. Experienced operators of shopping centers are well aware of these potential issues, but more often than not, they choose to blindly enter into a transaction without investigating these matters. I always recommend that seller’s get a jump-start and order all of the pertinent third party reports from reputable companies so that they can deal with any potential issues ahead of time.

A few years ago, I was hired by a pension fund adviser to sell a two 1970’s built shopping centers that were relatively close to one another. This particular fund adviser inherited the property from a re-assigned portfolio from another adviser. While we were putting together our marketing materials, the Disposition Officer decided that it was better to forego ordering the Phase I environmental report. The seller felt that a buyer and their lender would want to hire their own environmental company and didn’t want to duplicate efforts. As I listened to the conclusion, I could hear the tires screeching and I knew what was coming. I could not convince them otherwise. 75 days later we had a buyer and they began their due diligence of the property.

Within a few weeks the buyer’s Phase I environmental report revealed potential ground contamination from a site where there was once a dry cleaner. The report called for ground samples to be tested, also known as a Phase II report. This took several weeks to complete which meant that the Seller had to extend the buyer’s due diligence time. When the report came back, it revealed deep levels of contamination with a cost to remediate that could range from $500,000 to $2,000,000. Right out of the usual “re-trade” script, the buyer came back and asked for a $2,000,000 price reduction, which set off fireworks with the seller and a collision course of mistrust and bad-will ensued between the two parties. The deal died soon after.

If the Seller had conducted this investigation in the first place and disclosed the findings (with the potential costs) to the bidders while they were still competing for the deal, the impact of the environmental issue would have had a financial impact closer to the low end of the potential costs along with a much smoother transaction. The successful conclusion was that after another three months of negotiations, further tests and engaging high-price environmental attorneys, buyer and seller settled on a $1,000,000 re-trade amount and the transaction closed.

#2 Order and review a preliminary title report.

Do you remember those tenant improvements that one tenant conducted for their restaurant build-out? That is, unfortunately, the same tenant that never paid rent and you had to evict. Turns out, they did not pay their contractors either and they filed a lien against your property. This is just a small example of why you need to review your Preliminary Title Report.

On a much larger and dramatic scale, I recently closed a transaction where we discovered that the parcel map did not match the property description and buyer and seller were engaged in a lengthy, 9- month process) to correct and re-record the legal description. Thankfully, the buyer stayed with the transaction despite and overall market correction that decreased the value of the property during the escrow period. Otherwise, this misstep could have cost the sellers about $3,000,000- which is about 10% of the purchase price.

#3 Review and abstract all of your leases.

In most cases, a property owner has not dusted off old leases since they purchased the property. However, when it comes time for the due diligence period, sellers literally dust the lease and hand it to the buyer without the awareness that they are setting themselves up for a potential re-trade.

One of the first things my team does after we get an assignment is abstract the leases and look for missing pages. More times than not we always discover a discrepancy between the lease document and the previous abstract and or rent roll.

Recently, we were marketing a property where we reviewed the leases and discovered that the major tenant had one more five-year option than what the seller was representing on their initial rent roll. This discovery proved to be material to the value of the property since this particular tenant is paying about 25% of market rent and the initial value predicated bringing the tenant to market rent sooner than later.

In this instance, if we had discovered this during buyers’ due diligence we would have been re-traded about four million dollars. Instead, we were able to adjust the seller’s expectations ahead of time and avoid any an unnecessary re-trade over not knowing what the leases contain.

#4 Interview your tenants and control your surprises.

In the long history of buyers interviewing tenants during due diligence there has never been a tenant that has proclaimed to be doing so well that they could not wait to pay more rent.

I do not have a clear way to support this statement but after many years of being a concerned on-looker for these interviews, I know to expect the complete opposite from tenant interviews.

It is always a great idea to check in with your tenants prior to a sale to see how their business is doing and to harness whatever challenges they may be having. It is not necessary to advise the tenants that you are thinking of selling the property, but it will go a long way to sit with them and listen to their overall frustrations. This will provide you a glimpse of the overall health of their business and gives you an opportunity to address some of their logical needs immediately. This exercise will also give you an opportunity to disclose to your bidders any material findings that you discover, allowing for a smoother transaction.

The last thing you want is for the tenant to vent all of their frustrations during the buyer interview. Yet that is exactly what happens as most often this is where the tenant feels heard. I have witnessed tenants take advantage of the buyer interview to exaggerate their frustrations and to make their case for; a rent reduction, capital improvements, signage and better maintenance, etc.

In the meantime, the buyer is intently listening, making a much longer list of capital expenditures, and increasing their tenancy risk to make a case for a re-trade. By the way, never let the buyer interview the tenants without seller representation present during the interview.

#5 Make sure you understand your Buyer.

The most important way to avoid a re-trade is to make sure you have a genuine Buyer- it sounds so simple yet it is very simple to miss since the number one reason for re-trading a property’s price is because the buyer never intended on paying that amount in the first place. In a competitive situation where you have several buyers pursuing your property it may feel like a season of The Bachelor ( the ABC television series where several suitors pursue the opportunity to exclusively date one Bachelor /Bachelorette) where your suitor will tell you just about anything in order to get awarded the opportunity to exclusively date you. Therefore, before deciding to go “exclusive” and engage in a binding contract with a buyer make sure that you completely understand them. It is not enough just to interview the Buyer, but you must completely understand the reasons they are buying. You must understand their underwriting principals and their potential challenges while they investigate your property. Make sure you call their references and do research to find out whom else they have worked with and contact them to understand how they behaved during the transaction. Asking the right questions and diving deep into each answer may seem tough at first but will save a lot of time, which ultimately preserves the value of your property.