Office Space

Landlords and Overseas Startups pt 4 of 4 Ep 8

0:00

So can a tenant in negotiation ever ask, say, Hey, we don't have money, we want to give you equity in our company. Does that come up a lot

0:08

that came up in the early 90s when I was working for prologue just and some other, you know, counselor

0:13

told me a story there.

0:15

No, I just know that they that that's been a discussion, it's not something that they would always do. Okay. But potentially that came up quite a bit. Yeah.

0:26

Is that happened now that are you said back in well.com time. But

0:30

yeah, I think landlords a little more cautious because they you know, they could have been burned in the past with a lot of that. And they may have new guidelines to that that's not really their core business. So they should just be doing what they're supposed to be doing. And not not investing necessarily in their tenants business. But I know that some do.

0:49

So search, some you got to understand are some that are smaller landlords, they may take a risk big land or the institutional guys I have multiple tenants in your office building, that probably is not going to happen.

0:59

Right. Okay. Interested? So some of our viewers are overseas and countries such as China and Korea all over the world, how's it different for them? When they come to Silicon Valley? What questions should they be asking? I mean, they don't have a US credit history, they may not have a credit history at all, depending on where they're from, how does how did they go about finding a location?

1:21

Well, they partner up with folks like us, who can help us help identify where they would like to be. And this is after we find out you know more about them and more details about them. But, you know,

1:34

I have a group I'm working with right now. And it's just investigation as you go day by day, you know, because sometimes you're dealing with them on a whole different time frame, you know, like, I'm, I'm having conference calls at nine o'clock at night. Yeah. Which is like, their, their morning or Yeah, so you just try to accommodate and figure out what they're looking for. And when they're here, ask them as many questions as you possibly can on on, you know, how are you? How are you established already? Are you a California Corporation? Have you incorporated yet? What's the process that you're going about right now, in terms of how you're going to finance this operation? And

2:16

so if I'm a company from will say, Ukraine from unit city from mats area, who is a guest earlier and I come to Silicon Valley from day one, I found a location How long does it take from when I when I decide to location, or when I connect with you to start looking for a location to sign a lease to be able to move in? Can this be done in a month? Or is it a lot longer, lot shorter?

2:44

Yeah, I don't think a month will do it, in my opinion, depending on how ready their company is overseas. Because I work with a lot of companies overseas, that are just not aware of what the due diligence requirement from a landlord tenant are in a landlord. A lot of landlords, you know, sincerely coming from overseas, that level of trust is not as strong as a local company.

3:04

And it takes them time because they're traveling back and forth. And when they're here, they're seeing things, but then they go back, and then they're reporting their directors. And then maybe those folks need to come out and see the property. And there's, there's a lot of back and forth, back and forth, that initially can happen in the first two to three months of helping this client even identify space. So you'd recommend an overseas founder, one, one of the people on his team to come to Silicon Valley, meet a broker, build that relationship on maybe trip one

3:32

trip to come see a few locations, Chip number three, kind of make the decision and then trip for I mean, that's, that's normal. That's normal.

3:43

Yeah, and I would say anywhere from two to six months. But I, you know, it depends how large of a company you're dealing with to. And sometimes you can find a space immediately if it's, you know,

3:52

maybe it was a smaller space, and you've got a growing company, 10 employees, 20 employees, we've got plenty of options may not do take too long, you get into some bigger size requirements. And then, you know, you want to give yourself a longer window, do anyone from overseas come here with completely off the wall expectations, you know, I want this office, I'll pay this much you go, I'm sorry. That's, that's the price of a chair it Do you ever come across that

4:19

I do. I mean, like, it's not way off. But it's more like, you know, the send somebody else that's not really and real estate or tenant space acquisition environment, they may send somebody from marketing or something, and they may not know what the landlord expecting or how to work with a broker. So there's a lot of back and forth, and we try to help them prepare by telling them that we need access, or the landlord needs to look at your financials and your business plan and that sort of thing. And so they have to be ready to provide that kind of material

4:52

is there any like vocabulary, these, you know, price per square foot or things like that, that if they know before meeting, you could say they have a lot of time?

5:04

Well, you know, a lot of time we're educating them on the on these buzzwords like ti was, you know, tenant improvement. And sometimes we just say, you know, we're kind of tip looking for, and they don't the tenant improvement. And that's important because one client of mine wanted a lab within their

5:22

part of their r&d operation. So then I was asking them about the kind of power that they might be, you know, power needs that they might have. And he he wasn't so sure about that. So that's pretty critical. Because if you're going to do a lot have a lab component, you may need 200 to 400 amps of power in your space. So it's important because then now he'll go back and ask the key questions that he needs to be able to do you ever give potential tenants a list of questions and you

5:49

say, answer all these before the next time we talk? Yeah, yeah, definitely. Yeah. What up? What advice would you give a founder out there that hasn't found any office space yet that's still working at home on when they first talked to landlords or what they should be thinking of other than what we've already talked about. So far, we've talked about location of your employees, we've talked about transportation, we've talked about lease options. We've talked about talking to brokers who can make introductions, and this is all amazing. what's what's border to know.

6:21

Another thing that I like to do is recommend a good business attorney. Oh, because, as you know, we're here to help with this least process from start to finish. But when you get into the business points of the lease agreement on what you've negotiated in terms, there's also the boilerplate language within the Leafs and if you're if you know, foreign company company here, you're not really familiar with a lot of leafs language, okay, highly advise that they use business attorneys to review this documentation because we're not attorneys, you know, we help negotiate these deals, but to protect them, that's just an important part. Do you have a business attorney Do you need a reference to a good local real estate attorney Have you see a when that because they didn't have an attorney got in some hot water later on,

7:07

not too much hot water, that

7:09

never really hot water, but it's just something that they, you know, it's not easy language for them to review on their own. Yeah. Okay. And so they should have a second pair of eyes to take a look at that and what their needs are.

7:20

And Carlos, what advice would you give to a founder

7:24

before you met them, you know, any information you wish to pass on to someone,

7:30

as far as leases are concerned, most epic both seem to think about their distributed strategic location where they want to be and if it fits their needs. I mean, that's the bottom line. I mean,

7:42

I think that they allow them made think that they need a certain thing, but a lot of times, it's better for them to be in a shared environment, or maybe find somebody that has a complimentary type of business with them, that they can go in together, there might provide some synergy to them, and you can make those kind of introductions as well.

8:00

That's great. And married before time runs out. Yes, please talk about how people can contact you and a little brief overview of yourself for more time.

8:08

Sure. So again, Mary blazer. I'm with Newmark Knight Frank and folks can reach me at my email which is m blazer at n g. k. f.com

8:19

we have our company website WWW dot NGK f.com as well.

8:24

Carlos Carlos Toronto Kwan, one number 415-608-8409 and we have dedicated 10 representation agents in my firm.

8:34

That's great. So Mary Carlos, I want to thank you guys for taking the time coming here on Silicon Valley successes and people at home. For further information, please visit our website. Silicon Valley successes comm check us out on YouTube, Facebook, and all the other social media and we hope that you got a lot out of this. And in the future we're going to have more guests from investment bankers, bookkeepers, we have some amazing founders coming up with in the next few episodes. So we look forward to your future attendance. And thank you again for taking the time to to watch.

9:11

Thank you. From all of us at Silicon Valley successes. We hope you found the information presented today useful in your path to success. For further information on accessing the resources in Silicon Valley. You may visit us on the web at Silicon Valley successes. com on Facebook and YouTube. Thank you. And remember, we want to help you in your journey to become the next success.

Office Space Options and Startups Pt 3 of 4 Ep 8

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as so. So back to the startups themselves, when you interview them? How do you know that they're financially qualified or fit for that for that landlord? Is it they're about to raise their next round of funding, they have money in the bank, or they're talking to investors kind of what stages Could they be at for them to actually have a serious conversation? And do you turn any companies down?

0:25

Typically, I tell my clients that these landlords are looking for a profit machine, a balance sheet and income statement for the last three months, usually for the last two years, but they don't have two years worth of that kind of information. But whatever they can provide. So they're angel investing who their backers are okay, if some big name backers, or an angel that would have VCs, that helps a lot, right. And also, if they have money in the bank, so that they can show they've got so much cash in a bank account that they can support landlord just want to make sure they're going to pay their rent or whatever obligation of service that they have. Because you know, a lot of startups to burn through cash, they've got a high burn rate. So the landlords just want to make sure that because they're investing in that company, when you think about it, yeah, it's, you know, it's money that they're generating every month. And so they want to make sure they're going to pay their bills. And then there's personal guarantees that are often asked for, okay, from startups.

1:21

So with that personal guarantee, say, I'm the founder of the company, is it me and my whole team that's guaranteed Is it just me and the other co founders, the what's the guarantee on

1:30

it's usually a personal guarantee, it could be a person who is one of the corporate officers who would be willing to guarantee the least people are not always that inclined to want to do that, and put their own assets on the line. So sometimes they'll ask for a letter of credit, or an increased security deposit is another option, right. So, you know, they really want to just try to cover upfront costs, like commissions, tenant improvements, any sort of concessions that have been given to these startup companies,

2:00

tell me about the tenant improvements, exactly what that is. And before answering that, so on to make another statement. If you want more information on this or any other topics we've covered, please visit us at Silicon Valley successes. com was Silicon Valley successes, calm right back to you. So what's tenant improvements,

2:18

I'll turn it on purpose, really the the criteria and the preparation of the space for the tenant to operate in their own business operations. So it's a matter of, for example, putting up walls, putting up offices, conference rooms, it could be a kitchen at it could be something like that. So it really up to the specs and design of the tenant. And then that will be negotiated with the landlord who pays for what how much of free rent that they can get. And that's where this is where the brokerage come in. And you can negotiate that on behalf of the 10 and the landlord. So the broker

2:52

come in and you go to the broker, listen, I want one month free rent, or three months for your and what's common, and what areas can a broker negotiate for the landlord or the tenant?

3:03

Well, in a tight market where the rents are really high, and it's very competitive, landlords can call the shots if they don't want to give free rent. They don't have to give free rent in a softer market, I would say one month of free rent for every, you know, two years or two months free rent for a three to five year type term. But that would be really saying a corporation that right? I mean, just a start up what's a typical startup? least six months? A year? Two years? I would say about a year,

3:28

yes, about 12 months, okay.

3:30

And if, say, 11 months in the startup goes, you know, we're have to file for bankruptcy. Sorry, that personal gain T, I really have no money because I spent all the startup what happens that?

3:42

Well, we as brokers can help to market the space and try to get another tenant to backfill and take that obligation off of the tenant. Technically, they're still obligated until we can, you know, relate the space, we can tell the landlord landlord may have another tenant because they do a lot of marketing as well. Some of them, they may have someone that might want to just backfill that space. So it just really getting the word out and trying to help these people and and make it as painless as possible. Do landlords every go to tenants and go listen, I have someone else that wants to pay more than what you guys are currently paying. I'll give you some money. If you leave.

4:17

That's happened. It could happen. Yeah, a lot of times, what happens now is that, you know, the climate is very kind of like, unpredictable. So you have a lot of tenants that are either downsizing or they're expanding. And so they need new space, it may want to abandon the current space, so we can help sublease that space as well. And if they need to leave early, then we can help them something except space as well. So really determines a lot of our communication between us brokers and the tenants and allows Mike Phillips and as well, so how often should the tenant be talking to you every three, four months or monthly, I recommend it because I put a client in a space back in October, and by May of the following year, we were looking for new people, then they had signed a one year lease obligations. So every couple months is a good idea to be just on the chicken them. So you

5:06

say your broker is actually part of you, your team, almost like your lawyer, your accountant, bookkeeper, that one guy always they're looking for that next operator space for you?

5:15

Well, yeah, it's all about relationships. And you want to start early on having these relationships that hopefully build into longer future relationships and growth that you're helping them to achieve. Because I, you know, I've had a client that started small and about 1200 square feet, they, I then expanded them to, like 5000 square feet, and then they move to 15,000, now they're in 30,000, it's just a great success story. So you love when you can stay on that path with them and be in touch with them and, and help them in their growth, especially with

5:42

the amount of people that they're bringing on and their space needs to drastically change when they get to those levels of needing bigger space to brokers also make other introductions to maybe to investors or potential business partners or to brokers ever reach out to their personal network and say, Hey, I have this startup here. I'd like to introduce you to is that ever happened?

6:05

Yeah, that's a good that's a great question. Actually, for me, I do because I take an interest in the tenant, I take an interest in a company because I've learned a lot through the process of helping them qualify. And then in that process, I actually asked them, you guys need help with funding, when's your next event would you like to be close to another type of 10 our type of investors because we'll know who's in a building or who's nearby and so we I like to connect them and it makes sure that they're also successful nervous as hopefully we play a role in that because a stressful 10 that will be a successful future business and they might grow and we can help them there as well. And then the lender will also help out because they will know that the they want their tenant to be financially successful so they can, you know, grow and take care of their property.

Location Matters Pt 2 of 4 Ep8 Startups and Office

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So I have six employees, for example, and I would come to you and go, we need to move out of my apartment to an actual location right now, you would tell me, you know, this is where your next hires might come from these, these these companies, this is where your current employees live. And this would be the best commuting routes. What other information could you give me?

0:21

Well, I mean, what I would really give them as help them prepare for potential space that they're interested in, they may not know that it requires financial qualifications, as well as a business plan, as well as a personal guarantee because Atlanta are looking for a tenant as fully qualified and fits in their building. So it's a lot of preparation work that you have to do with a startup and they might not be aware of they can do you think they might be just like signing a residential lease, but it's quite different is more of a business relationship. And there's a fit with the building as well.

0:53

So you go into more detail about that in Mary, you'd like to add, because I really have no idea about this business really relationship, please tell me more about it.

1:02

Well, from a business relationship perspective, you know, we have our fellow brokers, and that we do a lot of work with, we have the ownership of buildings that we have relationships with, and other, you know, real estate professionals. So we have sort of this inside track on what's happening, and we're on the pulse of the market. So when these companies come along, and they're looking for space, we know, for example, a space that may have just been vacated, or something that's maybe going to come to the market that's not technically being marketed and available to just the mass

1:32

the public. And that's because, you know, the owner of that building, or the landlord, and, you know, the last person's least as six months from now, a year from now,

1:40

right. So we're, you know, that's our job to be real estate, to know what's going on in the market, so that we can service these clients to the best of our ability. And I think that it definitely helps to add value. Because when you think about these, these decision makers of these companies, and how much time they're trying to put into running their startup, you know, it's a lot of time and communication and trying to identify properties in the market. So if you're reaching out to professionals like Carlos and I, to help them identify the properties that could be well located and suited, and help them with understanding all these business points that need to be negotiated in disgust, it'll help save them a lot of time and effort now is the difference from a startup coming

2:20

from another state to Silicon Valley verse in other country to Silicon Valley of what types of problems or situations do the different startups depending on where they come from face when they come to Silicon Valley, I

2:33

think is pretty much the same thing. I think there's an expectation of

2:38

what the land or requires of them, I mean, a lot of them, for example, I experienced with the folks that are doing drones, so they have big, large propellers, or some of them are doing robotics that needs space where they can go down the aisle and these type of things, and they don't know what locations will allow that kind of a usage. So there's certain type of usage, for example, PDF, our production, production, distribution, repair some of the industrial kind of zoning and warehouses that can actually have offices in there as well. So the these are the type of usage is that some of these startups will require their your typical office won't have that type of availability. So

3:17

right. So for example, a client like that might go into an r amp D facility as opposed to a facility with

3:23

research and development, right.

3:24

And so in those types of buildings, you're going to have power requirements that can be different than your typical office building. So with their technology, they may need, for example, some higher amperage in power 400 amps, or up to 1000, and it just depends but they need but that's, you know, we need to ask those questions and, and help them figure out what their needs are. From that perspective. Clear, high rise building high ceilings will look toward the shortage archive doors for deliveries.

3:57

So how much do you actually have to know of the startup what they're doing their product, what they're working on in order to give them the best option for them?

4:05

Well, we that's a really good question actually. Because what I do, Mary is I might actually go visit them first, make sure to qualify First of all, and they say who they are, they say because I will on behalf of the land or the owner of the building, I actually have to go to a site visit and we're currently located they have a current location, understand your operation and see if it's a fit for them, or what's a fit interested.