In this episode, Hal and Richard talk about using a Special Purpose Entity, Single Purpose Entity, or SPE to insulate tenants from liability when signing commercial leases. At 3:38, Alan Wildes talks about his experience negotiating commercial leases, adapting to a changing industry, and how his ethos when working with clients has led to his success.

                                                                                                                  Transcript

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Hal Coopersmith: Welcome to Broker’s Angle. I’m Hal Coopersmith. We’ve a great episode for you where we discuss the Single Purpose Entity or the Leashold Entity and its benefits for protecting tenants and our thirty minute or less interview is with Alan Wildes where we speak about his career journey including how Alan says he reinvented himself.

Alan Wildes: Well, when you go from one company to another, they don’t look at you the same way. You know, the company that I had been with for 19 years. You don’t get pigeonholed but just sort of treated the same way by a group of people who have known you for a very long time. And when you come to a new company without any history other than knowing them through the business. And there were some friendships that I obviously had through my term there too, I sort of had to reevaluate the way you address things the way you would, and certainly I didn’t change the way I treated my clients. That continued, but had to sort of make your way in a new field. 

Hal Coopersmith: But first Broker’s Angle is sponsored by the law firm of Coopersmith and Coopersmith, a boutique real estate law firm practicing in commercial and residential real estate for over 87 years. This of course is attorney advertising, so we’re obligated to say prior results do not guarantee a similar outcome. 

Richard Coopersmith: But Hal we all recognize that you are the leading Coopersmith. 

Hal Coopersmith: That is so kind of you to say Richard. So one of the things we wanted to highlight in this episode is something called by many names: the single purpose entity, the leasehold entity, the special purpose entity or the SPE. But all of those accomplish the same thing, insulating a company from liability. Let’s talk about some of the reasons why a tenant may want to use a single purpose entity. 

Richard Coopersmith: Well, Hal understanding that companies have many different structures and accounting practices that in fact dictate who the tenant must be. However, if circumstances permit, we would of course recommend a single purpose entity insofar as it insulates the main company from liability, which is important if there are more than one location. Additionally, a single purpose entity may provide additional flexibility in respect of assigning a space or subletting. Brokers should always check with the client as to who the tenant shall be. If circumstances permit, we recommend the use of a single purpose entity for the following reasons. First, it protects the client against certain potential liabilities in the event that the client has multiple locations. And secondly, it provides some flexibility with respect to assigning and subletting. 

Hal Coopersmith: Certainly there are many reasons why a tenant would want a single purpose entity and too many reasons to go through here, but those two reasons that you gave Richard apply to both office and retail. And that’s important to recognize. But what’s also important is that if a tenant is using a single purpose entity, the landlord needs additional security and that can take the form of an additional security deposit or a letter of credit as well as a corporate guarantee. But of course you would ideally want a limited corporate guarantee. And finally, the one thing that you definitely need to include is the ability to sublease to an affiliate. So with that, let’s go to our interview with Alan Wildes. So you didn’t always want to be in real estate. You first started going to dental school. 

Alan Wildes: My dad is a practicing physician at the age of 90 and felt that each of his children should be healthcare professionals. I’m the oldest of four, so I sort of took it on the chin and spent a year at Columbia University Dental School and withdrew after one year, much to my dad’s chagrin. 

Hal Coopersmith: And then what did you do then? 

Alan Wildes: I answered an ad in the New York times and took a number of interviews and worked for a small real estate firm for about a year before I went back to business school. 

Hal Coopersmith: What was the name of that firm? 

Alan Wildes: That was Andover Realty. 

Hal Coopersmith: And what did you like about real estate when you were working at that firm? 

Alan Wildes: I liked dealing with people on a regular basis. I liked having control of my time and I liked the upside of being able to earn a lot more money for putting in a lot more effort. 

Hal Coopersmith: And once you got your MBA what did you decide to do after that? 

Alan Wildes: I had interviewed at a number of more traditional institutional type companies, was about to take a job at a real estate consulting firm until I asked what my day would be like and they told me that I’d spend probably 60% of my time on the road and the rest of my time behind a computer. And I had just gotten married and had no interest in spending that much time away from my wife and certainly wanted to have a lot more client interaction. So I passed on that again with my father shouting at me that I shouldn’t be giving up a great opportunity like that and went into brokerage. 

Hal Coopersmith: And what was the brokerage business like when you first got into that? 

Alan Wildes: I worked for Edward S. Gordon and it was a shark tank. Ed Gordon himself, he said, that you are a guppy and that you should stay behind the rock until some food came out and come out behind the rock and grab the food as quickly as you can, as quickly as you could before an a bigger fish came out to eat you. But it was a great learning experience. He knew what he knew and he knew what he didn’t know and he surrounded himself with some very, very smart people. And I think that many of the great policies and procedures that are in place in most of the larger real estate brokerage firms today emanated from that company. For example, the consultants, the consultant department that was a brainchild of Ed Gordon and Marty Turchin and those were for the most part MBAs, CPAs, people with advanced degrees who had a great understanding of the financial analysis. And they actually formed the core of a lot of the transactions that took place, certainly the larger ones. 

Hal Coopersmith: And as a guppy, what were some of the things that you were doing in order to get some of the food? 

Alan Wildes: A lot of canvassing, a lot of canvassing and a lot of speaking to the older brokers and seeing what their ideas were and where we should be looking for business. 

Hal Coopersmith: And how have you been able to grow your brokerage business? 

Alan Wildes: I think understanding of Edward S. Gordon was that the client came first and that there was a certain professionalism that was required. And it started with Ed Gordon telling you that you couldn’t wear loafers or any color shirt other than white and he felt that that would permeate to the rest of your business and the professionalism that was there and the continuing education that they provided really set the tone for a lot of brokers success in this business. 

Hal Coopersmith: So how long were you at Edward S. Gordon for?

Alan Wildes: 19 years. 

Hal Coopersmith: 19 years, that’s a long time. 

Alan Wildes: It was. And the attitude there had changed a little bit over time and went from Edward S. Gordon, which was Ed’s company that he ran to Insignia, which was a publicly traded company. And we really a client focus, but an employee focus as well. And then CB purchased Insignia in the early 2,000’s. 

Hal Coopersmith: And what did you do after CB? 

Alan Wildes: After CB I joined a group from London that wanted to establish a beachhead here in New York. And we purchased a number of properties here in New York City, which we were responsible for doing the leasing, the management of and the upgrading of all the infrastructure and a lot of the build-outs for the tenants. And we bought some properties in LA, in Los Angeles as well. When the market sort of hit the skids here in New York in 2009 it was far worse in London where our company was based and that sort of set in motion my coming to Cushman and Wakefield in 2011. 

Hal Coopersmith: What was it like going back into the brokerage business after being on the landlord side? 

Alan Wildes: The skills were still there and a number of my clients were still there as well. So that was a little bit of a good base, but it required pretty much starting again with a new group of people with a new company and sort of reinventing myself a little bit, sort of incorporating a lot of the newer opportunities that were out there into my business. 

Hal Coopersmith: I like how you said reinventing yourself. What were some of the things that you did in terms of reinventing yourself? 

Alan Wildes: Well, when you go from one company to another, they don’t look at you the same way. You know, the company that I had been with for 19 years. You don’t get pigeonholed but just sort of treated the same way by a group of people who have known you for a very long time. And when you come to a new company without any history other than knowing them through the business. And there were some friendships that I obviously had through my term there too, I sort of had to reevaluate the way you address things the way you would, and certainly I didn’t change the way I treated my clients. That continued, but had to sort of make your way in a new field. 

Hal Coopersmith: You also mentioned incorporating technology into the way that you are doing things. How are you incorporating technology now that you’ve reinvented yourself? 

Alan Wildes: Well, when I joined Cushman and Wakefield, I brought to the company, a building agency that had about a million square feet. And the way they were marketing space, five years since I had left the brokerage business, there was a lot more digital advertising. There was a lot more that was being done in social media and there were a lot more mediums to be able to reach out to tenants and to brokers. So incorporating that was important to be able to accomplish what we needed to do and we were very successful in that endeavor. 

Hal Coopersmith: And you said that the way that you treat your clients didn’t change. What are some of the ways that you treat your clients that you think brokers could benefit from learning from? 

Alan Wildes: I think it’s most important to fully understand your client’s needs. That’s first and foremost. And then a keen understanding of the market and an understanding of the other side’s position and an indefatigable professional approach and a work ethic when you’re dealing with your clients. 

Hal Coopersmith: And how are you able to have your finger on the market? How are you able to get those insights about the market that other people aren’t able to do and understand the other side? 

Alan Wildes: I think a lot of it has to do with relationships that I’ve established over the years, both on the tenant’s side and brokers who I speak with regularly. And then also relationships with landlords. Either those that I’ve represented in the past or those that I’ve done a lot of work with, sort of understanding what their needs are and what they’re trying to accomplish in a transaction. Totally beneficial to your client because you sort of have a target that you’re approaching. And then we always try to achieve better than what’s expected. 

Hal Coopersmith: And how are you able to maintain relationships with brokers, landlords, all the people that you mentioned and build on those? 

Alan Wildes: I play nicely in the sandbox. You know, I treat people with respect. I treat people the same way that I would want somebody to treat my children. That’s sort of the yard stick that I have and I treat them with respect and I don’t misrepresent anything. And what I say that I can deliver, I make sure that I can follow up on it and, and deliver. 

Hal Coopersmith: So I want to ask this, do you have any good war stories? 

Alan Wildes: Yeah, I’ve got a few actually. 

Hal Coopersmith: I’m sure you do. 

lan Wildes: One that sort of stands out, you know, I referred earlier to the great practices that are in place today. They’re called managed brokerage. So each firm tracks or attempts to track the activities of their brokers so that they don’t step on each other’s toes as they canvas other tenants. And you want to have a unified front when you approach a tenant for business. And years ago that wasn’t the case and it was a little bit of the Wild West. And I was working at Edward S. Gordon at the time and aggressively canvassing tenants who were in the marketplace. And I called upon a sizable tenant and was able to get the chief administrative officer out to see space and she was interested and we had scheduled a time for the chief financial officer of the firm to come see it as well. Well, unbeknownst to me, that same tenant had a lease out with other members of my firm, which included Ed Gordon himself and a number of other senior members of the firm who were representing a very noteworthy landlord at the time. So I was called to task by the director of leasing, brought into his office and he started screaming at me today, we call it abuse. But he was screaming at me beyond belief and hollering at me and calling me all these names. And in the midst of him screaming at me, his phone rang and he had one of those very large consoles on his desk. And he picked up the phone and literally threw the entire phone and the console at me. I moved out of the way, hit the wall behind me, and he told me to get the F out of his office, which I did. And I walked outside. And at that point I ran into a buddy of mine who now has been friendly with me for 30 years. But that was an example that sort of stuck out in my mind. And I knew that I had done the wrong thing when at a company outing several weeks later, one of the brokers in the firm who was notorious for doing the wrong thing came over to me and told me, “That was a good piece of brokerage Alan”. 

Hal Coopersmith: And one of the things that we asked you about was a difficult situation that you once navigated. And you had mentioned that there were four decision makers at your company and the critical one the CFO, didn’t like you personally. How did you navigate that situation and how could someone not like you? 

Alan Wildes: I guess you’ll have to ask them, but it took a lot of patience. That was something that I’ve sort of, as you get a little bit older, sometimes it comes to you a little bit easier. But I had to work my way through the process. And I think what really turned him was a creative and cost saving idea that I had that was sort of outside the box that no one had really given thought to about a property that they owned and was costing them a lot of money to operate. And through some figuring out how they could live with a lot less space and function, and save them a lot of money on an annualized basis and then sort of monetize the value, the building that they owned that made a big difference. 

Hal Coopersmith: What was the creative solution? 

Alan Wildes: It was a building that they owned that they were only using maybe 60% of it and their occupancy costs were about a million dollars a year and we were able to sell that building. So they achieved a nice windfall and then their operating costs came in at around $750,000 a year on a lease basis. So they didn’t have the appreciation or maybe some of the benefits to owning the building, but they were very, very happy with the result. And no one had thought about selling the building. They didn’t think there was much of a market for it. It was in a little bit of a remote area. This is somewhere in the Midwest. And we actually had identified two or three buyers even before we came to them with the idea because we knew that there would be those types of people that would be interested in that marketplace in particular. And in that type of building. 

Hal Coopersmith: And where do you see the market going right now? I think that you had also done a high profile deal that made the news or where do you see kind of the higher end properties and those tenants that are looking at those? 

Alan Wildes: There’s always going to be a flight to quality. And in addition to the newer buildings having better technology, higher ceilings, more efficient floor plates that allow tenants to have each of their employees occupy less space, but certainly have collaborative areas and open areas and certainly a great environment. And a lot of the tenants that have moved to the West Side, Hudson Yards or have moved down to the World Trade Center or the World Financial Center those have been tenants that have been typically in Midtown. So when people thought that there would be problems in Midtown, we haven’t seen them yet. So it’s still been, you can’t forecast the demand but you can forecast the supply and everyone saw all the supply coming back onto the market and was concerned about it. And there are lots of media and technology firms that are taking that space and keeping negative absorption at a very low level, let’s put it that way. 

Hal Coopersmith: What about the transaction at One Vanderbilt? 

Alan Wildes: That was a client of mine that I’ve represented for about 20 years. It’s a private equity firm. They’ve been around for a very long time, they are a super successful company and are a pleasure to deal with. And we had a very good experience negotiating with SL Green and at good terms for both parties. And I think they’re really going to enjoy living in what is probably one of the nicest buildings in Manhattan at this point. 

Hal Coopersmith: And why did that tenant want One Vanderbilt or why did that space make sense for them? 

Alan Wildes: For the most part it was because it’s centrally located. They’ve always been focused on being near Grand Central. Their offices are currently near Grand Central and they do a lot of entertaining of clients and of business people. So I think that they’re interested in the amenities that are in the building. And I think that the building makes a statement. It’s like we’ve made it, we’re really here to stay. Not that they weren’t beforehand, but this was something that they were interested in and really saw the value in. 

Hal Coopersmith: And if you’re not involved in real estate, what are you doing in your free time? 

Alan Wildes: Spending most of my time with my family and friends and do a lot of not for profit work for organizations and a little bit of golf every once in a while. 

Hal Coopersmith: Well that is a great note to end things on but I want to ask this question to all brokers. One piece of advice that you would give to another broker. 

Alan Wildes: Work hard and be honest.

 Hal Coopersmith: I’ve gotten honesty a lot. 

Alan Wildes: I think it’s a critical element. I think that there’s unfortunately some real estate brokers that will act inappropriately and will sort of muddy the waters for others. But, I think that those that are successful in the long-term basis are true to their word and have a work ethic that others try to achieve. 

Hal Coopersmith: Do you have an example of when it was hard to be honest? 

Alan Wildes: Nope. Now look, there was a particular situation where it’s not a matter of being honest. I think it’s more a function of being totally transparent. And there was a particular transaction that we had a lease that was signed by the tenant and about to be provided to the landlord. And I found out the morning that they were going to walk it over, that a building was going to be built to the west of it, obstructing 75% of their view of the river. And the objective of, the primary objective of the space was to provide a view of the river. And I called my client and told him that. And I think he was appreciative and the lease was not signed. So it was obviously monetarily consequential to me, but I felt like it was the right thing to do and I knew that I really didn’t have much of a choice but to do that. 

Hal Coopersmith: And then difficult and come back to you? 

Alan Wildes: We’re still very friendly. 

Hal Coopersmith: That’s a great example. Well, Alan Wildes, thank you for appearing on the Broker’s Angle. 

Alan Wildes: My pleasure. Best of luck to you Hal. 

Hal Coopersmith: That wraps up our interview with Alan Wildes. For more visit brokersangle.com or follow us on social media @brokersangle and please feel free to email us at angle@brokersangle.com