Having been in the office leasing business for over 50 years I have been asked on hundreds, if not thousands, of occasions to define an A building. My answer has always been the same – an A building is one that is owned by an A owner. Buildings like Rockefeller Center in New York, or the Transamerica Pyramid in San Francisco could never be considered new by any far stretch of the imagination. That said to say they are not A would be a mistake! When the tax laws changed in 1987, a fundamental shift in real estate ownership occurred. Simply stated, most private developers were forced out of the market, or became fee developers, with a rare exception being the Irvine Company in Orange County, California. Ownership rather quickly moved from entrepreneurial developers to financial institutions. Unfortunately, based on this new form of ownership, building ownerships are being represented by corporate asset managers with little, if any, frontline real estate experience. The personal touches have disappeared, and that is why I am writing this blog.

In the last week, two situations have occurred which are quite exemplary of poor institutional management. In one case, I am in the process of expanding a law firm in the West Loop of Chicago. At the same time, we are working on the expansion, the front door lock of the tenant space broke. The right thing for ownership to do would have simply been to replace the lock. Instead they received bids on the cost of a new lock and said to the tenant it was their responsibility. Their justification was that the space
had been taken “as is” and they were not responsible for the fact the front door did not lock. Whether they were right or wrong, they upset a tenant who is currently in the
process of considering a substantial expansion of their space. Rather than just be a good owner, $250 became an issue, something I simply can’t explain. In the end, after I put a lot of pressure on the building and they “graciously” agreed to pay for a new lock. Why this should even have been an issue is beyond me, and never would occur in a building where ownership was paying attention!

The second situation that occurred is described below. Last year, I renewed a good- sized law firm in a Central Loop building. While the owner wanted to maintain a certain face rate, he agreed to a good TI allowance, which could be converted AUTOMATICALLY to free rent. Fast forward to this week…the tenant received a default notice for the two months that he had not paid rent. When he pointed out that this TI allowance was automatically supposed to kick in and pay rent, building management indicated that he was required to give notice, or the unused TI allowance could not be converted to rent. The fact that the lease specifically says AUTOMATIC was meaningless! Again, after I did a great deal of wrangling, ownership surprisingly agreed to use the money sitting there to cover rent and, as a result, the default never occurred.

These two cases are only small examples of a problem which I see occurring more and more BAD MANAGEMENT. In my opinion institutional managers have forgotten one simple fact THE TENANT IS THE CUSTOMER. The institutional owners of these properties believe their investors/stockholders are the client…not the TENANT! This is unfortunately, in my opinion, not going to improve as the distance between the tenant, client, and someone from ownership with experience is becoming further and further apart!