Rent Relief, Getting Back to the Office, and More with: Adam Collins

Law Firm Growth Podcast Episode 47: Rent Relief, Getting Back to the Office, and More with: Adam Collins

Narrator: [00:00:00] Welcome to The Law Firm Growth podcast, where we share the latest tips, tactics, and strategies for scaling your practice from the top experts in the world of growing law firms. Are you ready to take your practice to the next level? Let's get started.

Jan Roos: Hey everybody, welcome back to The Law Firm Growth podcast. I'm your host as always Jan Roos, and I am here today with a very timely episode with Adam Collins, who is a Managing Director at MGA. We got a lot of stuff going on in the world, as we know. And at MGA, Adam is responsible for tenant representation.

Jan Roos: If you have any situations that have been going on with your office, this is absolutely an episode to tune into. Thank you for coming on the podcast, Adam. Thanks for having me, Jan. I'm excited. All right, awesome. Okay, let's talk a little bit about what you've been up to full disclosure. Adam does work with law firms, but other businesses, obviously as well.

Jan Roos: It's probably been a pretty interesting past couple of months for the [00:01:00] representation side of things. Just overview, like what's this year been like for you? It has

Adam Collins: been interesting. From a business perspective, it has been a great opportunity for myself to double down and focus on working on my business.

Adam Collins: When you're working from home like we were doing for, four months or so, you get a little bit more time, a little bit more focus to work. do both the working in the business and working on the business. So setting up some systems and really upping my prospecting game and my presence initiatives that's been really awesome.

Adam Collins: But in terms of how my business has gone and what I've been focused on and what my clients are needing is in March and April, it was a lot about how to help my clients get PPP loans and talk about rent relief and kind of help them reset and Kind of move forward or figure out the best path forward And now we're talking about a lot of it is bringing your staff back to the office And how do you do that in a safe way what changes into [00:02:00] nature office space and then some for some of them?

Adam Collins: We're looking even more long term. What does remote work mean for their office space? How do we implement that into their commercial real estate strategy if they're having a significant number of employees? It looks like They're working remotely fine, and they want to continue, and the employees want to continue working remotely.

Adam Collins: We really need to be thinking about how do we adjust your real estate strategy, so you're not paying for office space that you're not using. And if it's not the most efficient space for it, how do we re look at that strategy? And so that's been how I've been spending my time from March till now, where it's mid

Jan Roos: July.

Jan Roos: Yeah, gotcha. And then just for a little bit of context too. So geographically you're located in the DC area, right? Yeah. Yeah.

Adam Collins: So MGA serves DC, Maryland, Virginia. We've got clients that Have headquarters here or at least some sort of office here And then we also help them with real estate throughout the country, but most of our clients are here in the [00:03:00] DC area

Jan Roos: Yeah, gotcha.

Jan Roos: And then like it's interesting too. We're based out of New York here mostly So it's interesting. We were in a little bit of a different situation then Some of the other parts of the country. So I feel like part of your experience in, March and April is probably what any of the listeners that might be in Texas or California or Florida are going through right now, as far as just a broader question too.

Jan Roos: So I know I mentioned this in passing about MGA, but basically, tenant representation. We have a lot of attorneys that might think, Hey, look, I'm an attorney. I have to look at contracts all day. What's the situation with the law firm clients that you guys work with generally?

Adam Collins: Yeah it depends on who the clients are, but we serve as law firms just as well we service anybody else.

Adam Collins: And, obviously attorneys. Know their expertise and in it business owners in general sometimes when they're especially newer to the business. They're under this Misconception that oh, maybe if I don't use a real estate broker, I'll be able to save some money on the rent and frankly That's just not true with at MGA Our goal is to get you not only the [00:04:00] most efficient office space, but also the most flexible lease terms And of course, make sure that you pay as little as possible for it, negotiate that down as much as we can.

Adam Collins: And the way that we look at commercial real estate as much more of a holistic viewpoint than, say, a business owner trying to do it, we've got a workplace strategy department that We consult with and it's part of our firm to understand how you're working in your office. What's important, what exactly we need, not only from your office layout, but also from a building perspective, which building should we be looking at?

Adam Collins: Do we need 30 by 30 column spacing, 15 by 15, 15 by 20? What are we what's an efficient four plate? So we get into the nitty gritty to make sure that, cause that all translates into dollars and cents at the end. If we can get you into 10, 000 square feet when you thought you needed 15, 000 square feet, that's going to be a drastic impact on your bottom line each and every year.

Adam Collins: And then of course, just the market knowledge pushback that I get from some, when I was younger in my career, [00:05:00] some startup businesses is we've done our last couple of leases together. And our answer to that is of course, I did three or four leases last month. So having The market impact or the market knowledge about the intangible.

Adam Collins: So it's not, it goes beyond just rental rate. It's every aspect and looking at it from, with a fine tooth comb and understanding where those benchmarks are and what you should be getting out of your lease and how do we make your lease work for your business, right? It should really be an asset, not a

Adam Collins: Choosing the right landlord is, especially if you're a significantly sized tenant, they're your business partner. And that was really true a few months ago when some of my clients were looking at rent relief and how do we structure that? It's got to become a win situation for both because a landlord and a tenant are in this together.

Adam Collins: What we do is we structure relationships for three, five, seven, 10 years or even longer sometimes. And so [00:06:00] to be able to structure that relationship is something that it's. Delicate, but you need to it's not a, it's not a, just a hardcore dollars and cents negotiation. It's also laying out the groundwork for the relationship to make sure that it's successful.

Jan Roos: Yeah. And it's actually interesting too. So basically for anyone listening to the podcast, like unless you are, a real estate attorney, chances are you probably have done fewer than Adam has recently. And one of the things I see, even actually just, regardless of what we happen to be talking about, I always think.

Jan Roos: think there's a huge value in adding expertise, especially when people pay you as an attorney for your expertise. Sometimes three, four or 500 per hour definitely makes a lot of sense. So to dive in a little bit to the nitty gritty. So this is the situation. So I happen to work on a fully remote team and we're fully remote here at case you'll, but for people that might've had a medium sized or a larger team, it's a different situation for rent relief.

Jan Roos: then most people who were potentially, tall looking at their personalities or something like that. So I actually find that fascinating. What was the situation when things were in the [00:07:00] thick of it for you guys? And how did you guys end up coming with some creative solutions for

Adam Collins: that? One of the things about rent relief is it's you got to give a little to get a little.

Adam Collins: You're not going to get something for nothing, right? I encourage my clients if they really did truly need it and actually, at the end of the day, a lot of my clients Their business wasn't so affected by it. I work with some doctors and dentists and some people that, have an educational client.

Adam Collins: So I get a lot of different types of clients where they needed their real estate to actually make their money. You can imagine a dental practice can't really make money if they can't be open, right? So there is an appropriate time. But it ranged, it varied depending on the type of landlord. And again, that's why understanding.

Adam Collins: What type of landlord you're working with is important. Is it a mom and pop landlord? Is it a big real estate investment trust? Because then you can pull some different levers, but it ranged from We got some one of them was a six months of half [00:08:00] rent from April to October, and then they were able to repay that deferred rent over the course of the next seven years.

Adam Collins: Then we had some other landlords that were more on the mom and pop side of things, where they were a little harder to negotiate with because if my client weren't paying rent, they wouldn't be able to really pay the rent. So being able to understand that, so in that situation, maybe they would get three months of half rent and then the repayment period was a shorter repayment, maybe with over the course of a year, as opposed to over the course of seven years, like some of the other clients I've had.

Adam Collins: So it would depend basically based on who the landlord is and, but again, it goes back to creating a win scenario. If you were seeking rent relief, it would behoove you not to think that you're going to get. free rent. It's going to be a deferment with some term tacked on or with some different sort of legal language added.

Adam Collins: So it had to be become a win situation. You had [00:09:00] to give something to get something, I think.

Jan Roos: Okay, gotcha. And it's interesting, too, because I was thinking about this in my personal life, I'm a bit of a cowboy negotiator. I was just thinking is this kind of a blood from a stone situation?

Jan Roos: Is it going to be like no money versus But actually that, that makes a lot more sense. And especially as you scale things up, it's like a real estate investment trust is just looking for, a rate of return over a certain time period, but versus your mom and pop, it totally makes sense that, that's going to be coming out of, their mortgage for the next month.

Jan Roos: No that's super interesting. And, as far as I, I haven't been keeping track on things state to state, but I remember for a while, I believe California was actually able to go up and get, a The mortgages at the bank level pause for a little bit, right? Do you see that?

Jan Roos: Especially as this thing continues to play out around the country, is that something that you think would be reasonable or people might be able to expect for holdout? I know

Adam Collins: that it's still something that legislators are working on in different parts of the country. It's difficult as there's a lot of different stakeholders and you talk about the large office buildings while one [00:10:00] building might be owned by, might have 75 percent equity from a bank like Capital One.

Adam Collins: They might have their 75 percent equity from private investors or a pension fund or the capital stack in every building is a little bit different. And so that's why this whole thing creates such a, a huge trickle down effect is it's where do you where do you give the relief, where do you give the austerity measures?

Adam Collins: Do you, Bail out the banks, de bail out the landlords, de bail out the tenants. Obviously, our government started with the tenants first. And we'll see what happens going forward as more and more landlords are starting to hurt. And from, for office properties and multifamily properties, industrial properties, the delinquency rate from commercial mortgage backed securities isn't drastically higher.

Adam Collins: then it was last year. From retail and hospitality, it's getting up there. I think hospitality, last I checked, 30 percent of the loans were delinquent or in default, which is obviously got a lot of impact on the rest of the world as people buy these commercial [00:11:00] mortgage backed securities.

Adam Collins: And so it makes for a difficult challenge. I'm not sure what's That's exactly going to be the answer that our government chooses. Overall, I don't know that we want to have a situation where every hotel is in foreclosure and every strip center and shopping center is in foreclosure. So I'm not really sure where it'll go, but there's definitely going to be At least maybe, I think, one more, one more

Jan Roos: wave of help.

Jan Roos: Okay, gotcha. And then, by the way, you're on the record for this, so that's locked in and loaded. We'll refer back to that. I'm just kidding. I know this is kind of speculation. It's a Ben Bernanke question, but, okay, no, but so yeah, it's, it, no, it's a super complex situation, and it's very hard to predict.

Jan Roos: But yeah, it looks like things are and again, to shift back Towards the northeast a little bit. So around where you're at and if I'm not mistaken on the pre call I did see you walking out of the office. So it looks like you're at least back to the office Adam but What's the situation around the dc area right now?

Jan Roos: And how are the your clients acclimating to getting back to work? And where do you see that going in kind of the near term?

Adam Collins: Yeah, so as we stand today in the middle of [00:12:00] July, downtown DC remains to be quite the ghost town. The Metro is myself and then some workers from the Pentagon. So not a lot of people are back to work yet.

Adam Collins: I do have some clients that are starting to trickle back into their offices and I think as we currently are, Labor Day, September, like mid to late September is where I've seen some of my other clients start to plan to open their offices and even then I think they're expecting capacity to be between 20 and 50 percent.

Adam Collins: We send out surveys for our clients to gauge, like, how much participation we're gonna, or how many staff can we expect to have back from the office? And from there, we put together a plan of attack. A plan of, okay, what do with the conference rooms? What do we have to do with workstations and the offices and the kitchen?

Adam Collins: And, how do we for lack of better terms, how do we COVID proof the office as best as we can so that we can have a limited staff back to the office? But as of now, [00:13:00] mid July, we're not seeing a ton of people back unless they are like, they need to go to the office for some sort of secure government work.

Jan Roos: And then, as far as the people, I think there's probably a lot of, especially probably the mid and larger size firms that listen to this podcast. It's you're probably missing the office environment to some capacity, but as people are there's definitely a carrot as far as people wanting to get back to the office.

Jan Roos: Like what, have you seen any sort of, creative setups or schemes that people are doing to minimize the down the risk of the virus while still being able to collaborate in person like they're used to.

Adam Collins: Yeah, I think we have so we're back at the office. We're not a huge organization.

Adam Collins: We've got about 25 people and we've got maybe about 20 or so that are in the office and our office is pretty spread out. We have a larger office than headcount that's currently here. So things like when we're talking about meetings, if you still want to have your company staff meeting, I, I think that Zoom and the other kind of video meeting platforms are still going to be necessary.

Adam Collins: when you're in [00:14:00] the office because you don't want to obviously put 20 people into a conference room again, at least not until we've got a vaccine. So that's been useful for us. And when we're having our staff meetings, it's important to have some signage to make sure that people are walking the right direction.

Adam Collins: You don't want people to cross and converge and, risk the spread of some droplets. But, and then also we've got hand sanitizing stations and Windex bottles strategically placed throughout our office so that after you. If you say you're in a call room or a conference room, you can wipe down your surrounding areas.

Adam Collins: One thing that I think that more people are leaning towards because it's an easy solution is to stagger the days at which employees come in. So if you've got, say, a finance department that everybody wants to come in back to the office, you don't want Your entire finance department coming in on the same days and the reason being because They're more likely to interact with each other and they're more likely to need to talk with each other close to close closely, so if [00:15:00] you stagger, monday wednesday friday these two people in the finance department come tuesday thursday the other two people in the finance department come and then if you guys need To meet you meet on zoom rather than huddle up in the conference room And so and you could do that with the rest of your team Your departments as well to just limit the social interaction that you have in close quarters with people

Jan Roos: Yeah, I think that's a great solution too.

Jan Roos: It's almost you know when they have those different locks and like the titanics Thank god forbid were to happen It's only going to get so many people and then switching gears a little bit but the same kind of vein It's like you mentioned a couple, you know in addition to the attorneys you have, you know Some of the the dentists and I guess probably what would be considered is dentist essential?

Jan Roos: I don't know. But as far as client facing concerns, because I'll give an example, we're working with a lot of estate planning attorneys right now and generally working with a pretty at risk population and usually, retirement age and older people, but also in a lot of states, they have the requirement for in person notarization of the finalized estate planning document.

Jan Roos: Have you seen anything as far [00:16:00] as like precautions and this could be any businesses that you work with or any, even any properties because sometimes a lot of times they're working in an office out of a shared building. How have you seen people making sure they're keeping themselves safe from their clients and how are they keeping their clients safe from them?

Adam Collins: Yeah. So I think people are for the most part limiting interactions pretty well by I've seen, I know a lot of businesses and a lot of them are pivoting to video, right? So if you're. I don't work with movers per se in terms of finding them space, but I know them and I know that they pivoted towards giving estimates based on FaceTime and Zoom, right?

Adam Collins: So to be able to limit those interactions when you can is great, from commercial real estate, a lot of that we've seen. For the first time, commercial real estate stepping into the 21st century and having video tours available online or we actually have now 3D walkthroughs like they've had in residential for years, we now have that for some office spaces, which has been interesting to see and makes things a little bit easier.

Adam Collins: I know some [00:17:00] states are I think they just in Florida, I think I saw they now allowing you to docu sign leases and which is coming at a right time, whereas Florida used to be able, you used to have to sign them in wet ink, not that I deal in Florida or anything, but I just noticed that people are more accepting of all the technology that we have and realizing we've got this technology, let's use it.

Adam Collins: And I think It's actually really great to realize that some people are forced to realize that we've got such a So much at our fingertips that we weren't utilizing before and to be able to network with people to be able to Check in with people I know that I've certainly been using more technology than I was before when it comes to walking through building options or proposals with my clients or When we're talking about redlining leases or letters of attendance.

Adam Collins: I've just In proactive and gotten more use of the technology. It's just been one of those things that

Jan Roos: oh, yeah, it's I would say probably it's likely that a lot of the stuff that's running for, Real estate is probably gonna be running parallel as far as like the [00:18:00] notarization a lot of these documents as well it's interesting and like I think honestly it's probably better for timing especially with that very corner case of estate planning that like, The states that have remote notaries probably going to be in a better position.

Jan Roos: And yeah, the rest of the states, I don't think we have any governors listening to this podcast. What, what's going on? Let's catch it up. It's funny. So we have a client right now and the guy's a WeWork guy. And every single time I see him we were on the zoom together and it's I am legend. The guy's the only person that we work right now.

Jan Roos: But how do you think this is going to end up affecting coworking situations for, probably the smaller end of the spectrum, as far as law firms go moving forward.

Adam Collins: I think it's gonna be tough for them for co working when we're talking about those companies that are two, three, four people, which makes up probably, depending on the co working space, 30 to 40 percent of their overall population.

Adam Collins: Sometimes office space is a bit of a luxury good. [00:19:00] And in the time of an economic downturn, the first thing that might go is that office space. working from home anyways, and then maybe there's a vaccine that comes at the end of the year, right? There's going to be a lag in the time that people go out and go get more co working space.

Adam Collins: So they cancel their co working membership, and then there's a vaccine, and then it might be, another year and a half before they realize, okay, it's time for me to get back into an office environment instead of working from my home office. So I think it'll be a tough time for them.

Adam Collins: The way that commercial leasing works. A group like WeWork and some of these other large groups, they've been expanding really rapidly. WeWork and some other co working spaces took a combined 1. 2 million square feet of office space in the D. C. area alone last year, which means that they grew faster and took up more office space than any other entity or any other type of entity, really.

Adam Collins: That's going to leave a hole in the market. In a market like DC where we're producing so much Class A space, [00:20:00] the demand is certainly going to fall behind from where our supply is going. Our supply is going up an incredible amount and our demand is remain to be seen where it's going to be. But I know that WeWork and the other spaces aren't going to be expanding.

Adam Collins: In fact, they're probably moving the other direction. We saw WeWork get back about 115, 000 square feet in Manhattan earlier this month, and they gave back another 68, 000 square feet in Baltimore. And so they're probably contracting their, the right sizing is what they're going to call it.

Adam Collins: And financially they've been on rent abatement mostly. So when you expand and you sign a new long term lease, you get one to two to maybe even three years worth of free rent upfront. And so for a company that wasn't profitable, during the good times in the last 12 months. I think it's going to be difficult when the demand is shrinking for them.

Adam Collins: The one thing I'll say about WeWork that might be an upside is I think companies that are in flux, the larger enterprise companies are going to look to [00:21:00] coworking spaces for flexible office space, flexible lease terms while they figure out their long term real estate strategy for the next year and a half, where a lot of groups are trying to understand.

Adam Collins: What the office looks like, what their commercial real estate strategy looks like going forward. There might be some room for WeWork office as opposed to signing on to a long term five, seven, 10 year lease with a prime landlord.

Jan Roos: It's interesting. I can't help but think of kind of the implications from that.

Jan Roos: So we're looking at in a lot of areas, one of the biggest buyers of commercial real estate. Getting this inventory back on the market. If somebody were in the position where, and look, we've had people on the podcast that have been in this position. There's some people, like I would call them your wartime CEOs that are absolutely making hay right now.

Jan Roos: And maybe they're hiring and maybe they want to get some office space. If that kind of guy wanted to time the market, and that's another one of those fun speculative, like what do you generally think would be like the dynamics to pay attention to, the [00:22:00] next year or so? They wanted to start getting into one of those situations.

Adam Collins: So yeah, so if you're talking about purchasing or leasing, I guess either or. Yeah, so I think if you're leasing and you have, you, you occupy office space and you're in the mindset kind of like me, we're in the downtime, you want to double down and continue to grow if your company's fundamentals are going and you think you're going to be somewhat stable, there is a tremendous opportunity for office tenants and we, I have clients like this where we're using this time to expand and.

Adam Collins: If you can fast forward the savings, so say that you were, your leases expire, you're a large law firm, your lease is expiring in five years. Why not fast forward that savings to today, get better economics in the lease term, get a few million dollars worth of rent abatement, right? Reinvest in your company, go out, get a top producing partner, a couple of top producing partners from other firms.

Adam Collins: And then how does that affect your revenue over the next 10 years? If you can get somebody who comes in and produces, A few million dollars a year for you because you're able to pay them [00:23:00] now as opposed to in five years, what does that mean? In, in perpetuity for your firm. So I think that there is for firms a great opportunity to expand if they're in that mindset, they're in cost cutting mode and there's other fundamentals with their company that we're concerned with.

Adam Collins: I see that's, it goes into the strategy and the planning of everything, but so there, there's that. And then if you're looking to purchase commercial real estate so far in the DC area, we have not. seen that much of a decrease in purchase price. We've not seen a whole lot of activity, to be frank. We're not seeing a whole lot of price discounting.

Adam Collins: I think most buyers and brokers are still trying to figure out what is that COVID effect going to be. I saw a number that there was a 10 percent price correction from February till now in July where properties were trading. So there's been a little bit of a disconnect or a discount, but so far we're not quite as many distressed assets as some buyers might have thought.

Jan Roos: Yeah, that's less than I would have thought as well. And [00:24:00] it's I don't know, it's depending on what news channel you're turning on, you think it's a lot worse than a 10 percent issue, but yeah, no, that's really interesting too. And it's that's the thing. This is one of those, what everyone says it's millionaires are made in a recession than in a, in boom time.

Jan Roos: So very interesting thing to keep in consideration. Yeah, this has been a great conversation, Adam. So if anyone's interested in potentially speaking out or reaching out to you about any of these issues, what's the best way to get in touch? First

Adam Collins: of all, follow me on LinkedIn. It's Adam Collins is my name.

Adam Collins: I try and post content there about commercial real estate news as it relates to Not only the entire country, but specifically D. C. and the D. C. area and office users and where the trends are going. I also have a newsletter if you want to email me. It's at [email protected]. I'm more than happy to add you to my newsletter if you're concerned about bringing your staff back to the office and understanding what precautions you should be taking and kind of some modifications to the office that you might consider that are You shoot me an email and I can send you over a couple of different documents that my firm has put [00:25:00] together.

Adam Collins: Considerations for returning to work post COVID.

Jan Roos: All right, awesome. And thanks for that. It's a super generous offer to really appreciate that. All right, guys, that will be it for today. So thanks again, Adam. It's been a super timely conversation. Obviously, if you made it this far, real estate is on your mind.

Jan Roos: So I think this is a very unique episode, but also very super timely. So really appreciate the time. For everyone else there, we will be back next week, Tuesday at 8 a. m. with another episode of Law Firm Growth Podcast.

Narrator: Thank you for listening to The Law Firm Growth Podcast. For show notes, free resources, and more, head on over to casefuel.

Narrator: com slash podcast. Looking forward to catching up on the next episode.