Articles About Commercial Real Estate
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Posted by: Liza L.
After years of promises of multi-megabit communications from major telecommunications providers, Fiber High LLC, a local 3-person outfit, is now actually delivering. By combining low-cost, no- or short-term lease, shared office space and direct links to the country's fastest public optical fiber network, Fiber High brings serious connectivity within reach of low-budget entrepreneurs and start-ups.
"Our fiber and copper network puts 40 to 100 Mbps on every desk," says managing partner and network designer, David Gjerdrum. "For people who need to move large graphic files or databases, speed is a necessity," Gjerdrum comments. "For others, it's just plain addictive."
Fiber High's style is totally without bling. Its founders noticed that many of their business neighbors moved out of Palo Alto in search of lower cost square footage as landlords spiffed up their aging buildings and raised the rent. As Fiber High's first tenant, a computational chemist developing an 'in silico’ predictive toxicology tool with NIH SBIR funding, put it, "I don't need anything fancy, just a place I can afford to hunker down with my three servers, work on method development and grow my client base. Given the early stage of my business … I'm not in a position to sign a multi-year lease but want to focus on the commercialization stage with the flexibility to move on or expand based on changes in 'market' conditions.
The Fiber High business model is to facilitate small, creative, highly-connected communities. Top capacity at the 989 Commercial St. location is twelve cubicles housing not more than thirty people. Its server room and electrical service can accommodate about 120 rack computers in addition to the desktops. "If we're oversubscribed we'll get an additional building," notes Fiber High partner, Liza Loop. She and Gjerdrum point out that fiber connected distributed computing facilities using existing HVAC equipment to handle a smaller number of machines is truly a "green" alternative to the huge collocation sites that are being built in Silicon Valley. They believe that small, collaborative workplaces will foster the kind of innovation the Bay Area is famous for.
For more information please visit: www.fiberhigh.com or contact Managing Partner, David Gjerdrum, by phone at 650 714 7667 or email at david@fiberhigh.com
Fiber High, LLC
Partners: David Gjerdrum, Brian Skiba, Liza Loop
989 Commercial St.
Palo Alto, CA 94303
Tel: 650 964 5623
email: Fiberhigh@gmail.com
Last updated: 10.17.2008 05:57 PM
Posted by: Sid M.
In follow-up to the Podcast discussion Frank Peters, Dave Berkus and I had a couple of weeks ago (http://www.thefrankpetersshow.com/), a few entrepreneurs wanted to learn a little more about the various channels of raising equity and particularly the characteristics of each channel.
Following is a 10,000 foot level, but focused discussion of the various equity sources:
Friends & Family
Your dad, uncle or a rich body – almost always non-strategic, almost always come with confused valuations and even more confuse structures that will be costly to clean-up later, and often the money raised gets to be wasted on experimentation. It is however, the easiest money to raise since they know you and trust you the most. Raising Friends and Family round generally does give the VC’s and the Angles the warm and fuzzy that at least your relatives and friends trust you.
Angels (individuals & groups)
An individual angles or group of angles that pull together to invest – generally invest as individuals or as an LLC. If you have the right angel or the right lead (if a group) to spearhead the process
things go smooth, the right group or person can bring significant focus to the process, the wrong angels can introduce a confused direction, non-professional angels often offer less assistance than you expect or they originally may claim, professional angles go out of their way to help a good entrepreneur. Angles often do not make second round investments, if dealing with a group the process may take longer than you expect. Example: Tech Coast Angels
Incubators
Provide a place, some computer and office support, some HR and accounting support -- only the focused ones work, a lot of incubators have real estate motives which gets them derailed from operations, often too dilutive for very strong teams. Example: Idea lab.
Venture Capital Firms
Organized large funds with a few managers in charge of investing the funds money and helping portfolio companies on the path to exit - funding ratios are very low (less than 1%), generally. The firm matters A LOT, concept stage investments are possible for insiders or entrepreneurs they have worked with before, but new deals must meet minimum requirements. Strong team is almost a must have. Example: DFJ
Management Intrusive Solutions
Informal Virtual Incubators – Individual angels who take a line position – they do make an investment and often request some options. Some entities have a formal limited fund with experienced operator partners offering money & interim CXO; usually utilizing convertible loan vehicles with options. Example: Momentum Ventures.
Risk Sensitive Loan & Warrant Models
Non-convertible loans with a warrant kicker – taking the first position, acting like a bank, but with a very aggressive risk profile. They are an excellent vehicle to bridge to the next round, but could be very expensive money. Example: Agility Capital.
None-intrusive Capital & Execution Models
Structured and staged investments coupled with extensive execution assistance without management replacement and with targeted valuation increases. This is a new and innovative model that reduces entrepreneur dilution and provides very early stage companies with what they need the most: focus and connections. It works best when the company valuation is not too high and the product is ready for market. For example: Venture Farm.
Last updated: 10.17.2008 08:51 AM
Posted by: Garrett K.
Top 10 Ways to Negotiate for your Commercial Space
1. Move in Date
If a space has been vacant for a long time, the owner is usually more willing to deal. If you can’t meet the landlord’s rent needs, but are willing to take the space right away, the landlord might be more willing to bend on the rent.
2. Monthly Rent
The common rule of thumb is to try and negotiate the asking rent down 5-10%. The leasing market gathers its pricing data from market comparables which are other companies signing leases. Data is currently traded among brokers so they can make sure their clients are receiving the most appropriate rental rate and terms. If you don’t have a broker or if your broker isn’t aware of the most recent deals completed, then a barometer of a 5-10% discount is a fair goal.
Now you can check your current and or new rent against current market averages with our Rofometer
3. Tenant Improvements
If the space is not ideal, try to negotiate so the landlord is responsible for all reasonable changes to the space. The longer term lease you are signing, the more willing the landlord should be to perform significant improvements.
See The Landlord’s View to see how landlords view the process.
A good rule of thumb is if you are looking for short term space, then gear your search to spaces that need almost no improvements. If the term is below two years, even asking more new paint and carpet might be a too much to ask for.
4. Free Rent
The amount of free rent depends on the current market conditions, your financial statements, and the term of the lease. With Shorter term leases (less than 2 years) it is tough to negotiate free rent because you are only there for a short period and the landlord wants you to paying the whole time. If it’s a five year lease, 3-5 months of free rent would not be unusual. Most justifications for free rent are that free rent is covering the expensive moving costs and other expenses associated with the move (e.g. stationary, wiring the space etc). If you are a start-up without revenue, the landlord will be hesitant to provide rent abatement because of their concern that you may default after 6 months and they will have provided free rent for 3 months. You may be able to negotiate the free rent after fulfilling an agreed upon minimal paid rent period. It doesn’t hurt to try!
5. Term
Landlords prefer a longer term lease because a space, on average, sits for 5 months vacant between leases. The less down time, the better it is for the landlord’s bank account, and so he will want a longer term agreement. What does this mean to you?
If you are comfortable signing a 3-5 year lease, you can get more aggressive on the economics (rent below asking, free rent, more improvements etc). One way to avoid a longer term commitment is to get termination rights written into your lease. This typically includes a rent penalty (3-6 months of rent), plus the payment of unamortized commissions and tenant improvements.
6. Furniture
Make sure you specify up front whether the furniture is going to be left after your lease expires and if you will be responsible for purchasing the furniture. It is expensive to move and a hassle a small business doesn’t need! Your best bet is to negotiate free use of the furniture and the right to purchase it at the conclusion of the lease should you want to take it with you to your next location.
If you need to purchase furniture, please see Rofo’s Recommended Furniture Suppliers to do it affordably!
7. Upfront Costs
Larger companies have the ability to get landlords to contribute to the upfront costs of the move process. This can only be negotiated during times where the market has a lot of vacancy. Small business typically can accomplish this same concept through free rent (see #4 above).
8. Security Deposits
Security deposits are typically a function of how much money a landlord will spend to get you to move into the space (commissions and tenant improvements) vs. how confident they are in your ability to pay rent (financial statements review). We have seen security deposits range from 1-12 months depending on the situation. A good rule of thumb is 1-3 months of security deposit for a small business who needs only minor improvements.
9. Commissions
If you are not represented by a tenant rep. broker, you can try to use this as a lever to deduct the proposed fee amount from your total rent obligation.
10. Options
Renewal Options, Termination Options, and Expansion Options all should be negotiated. These options provide you with the most flexibility and control of your office lease.
Last updated: 10.08.2008 11:05 AM
Posted by: Garrett K.
Listing Suggestions
There are several ways to help a listing lease quicker on Rofo. Below are some tips to help your listing stand out from the rest and lease sooner!
Title
Users on Rofo click on descriptive titles over 74% of the time as their first property choice. Think about words that they would identify with and are descriptive. Try to call out what you feel are the best features of the space and identify them in the title. Some example could be:
-High end space in premier high rise downtown with great natural light and four offices
-Great space with parking in ideal neighborhood for a start up
-Nice space for a non profit with building that is 80% NPO’s
Pictures
On average, most users gravitate towards listings with pictures. People want to see the space and envision themselves working there. If you have pictures available, definitely put them on your listing. If you don't have any, you should consider taking one good one and uploading it to your listing.
Space Size
If the total square footage you list on your ad is a range (200-2,000 square feet), you might want to consider entering the space as separate spaces.
Pricing
Be as clear and upfront as possible in the ad. Users of Rofo rarely click on spaces that are unpriced. If you know what the expected expenses are for a certain space, add them to the description. If you want to advertise any special offers like free rent, offer them in the title or description.
Description
Many users of our site search based on specific types of space or for spaces that are targeted towards specific users. Make sure to call out sublease or shared space opportunities as they are very desirable for those seeking short term opportunities. If you feel your space is a great opportunity for a non profit, a start up, or professional service firm, please identify this in the description. Build out and special features of the building should be identified as well.
Timing
Be very clear when the space will be available. If you are flexible on timing, please state so!
Following these suggestions should help you connect with the right company quicker using Rofo. Good luck!
Last updated: 10.02.2008 10:15 AM
Posted by: Terry H.
Many people ask me which type of system is better to buy; a system that is digital using standard phone lines, or a VoIP system utilizing IP services. There is no one answer that suits all situations, but there are a couple guidelines to go by. For a small business, a digital phone system using standard CO lines is still a great solution because of the amount of bandwith needed to assure quality calls on an IP system. Standard CO lines are dedicated lines from the phone company, so the quality is managed and pretty much guaranteed. For best performance on an IP system, DSL does not provide a managed connection, so a T1 is required and is a large investment for a small organization. Of couse, there is always the option to use an IP system inside connected to CO lines. This gives you the benefits of IP inside the office, while assuring high quality phone calls. Drop me an email if you have any questions about the services - terryh@generaltel.com.
Last updated: 09.30.2008 03:13 PM
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