PERSON OF THE WEEK: After 25 years in commercial real estate, Linda L. Zelm is ready for a new challenge. Zelm, a former senior vice president with Minneapolis-based Coldwell Banker Commercial Griffin Cos. and past president of Minnesota Commercial Real Estate Women and the Minnesota Shopping Center Association, is now at the helm of Small Business Real Estate Advisors, a start-up company based in St. Paul, Minn. MortgageOrb spoke with Zelm regarding her entrepreneurial endeavor.
Q: What inspired you to start a new business, particularly at a time when so many existing businesses are facing difficulties?Â
Zelm: Regardless of the economy, it is the time of my life to transition to a new phase of my career. It is time to make a contribution that is more meaningful to the engine of our economy: small business. When businesses are facing difficulties, that is the very moment when someone such as myself can be the most valuable to them in reducing their occupancy costs and negotiating better deals for better locations and better facilities.
Q: In announcing the launch of your new business, you were quoted as saying that you would assist ‘expanding small businesses who are less likely to seek help from competent experts.’ Why would small businesses be less likely to seek outside help – is there a lack of competent experts from whom to seek help?Â
Zelm: I have observed, over the past many years, that small business owners and staff are experts in their particular businesses and have neither the time nor the contacts to engage real estate brokers that are willing to spend time to educate and counsel. Brokers get paid to do deals, and the easiest and least time-consuming deals are those in which the client is sophisticated and has plenty of capital – which makes them desirable to landlords.
Many times, small businesses will seek assistance from junior brokers or residential brokers who do not have the clout or knowledge to negotiate the best deals for the best properties. It is a matter of perception. Small business is perceived as being less creditworthy and riskier to mortgagors and, thus, to a landlord who needs to maintain financing.
Q: What have you seen as the most common mistake that small business owners make in regard to commercial real estate?Â
Zelm: Many do not negotiate from a position of strength. I have seen leases without one change in the lease clause. I have seen many deals where the tenants don't use legal representation, do not attempt to make an offer lower than the asking rate and allow clauses in their leases that are detrimental to the long-term growth of their business. Some assume they cannot afford a good location, so they pick a poor location just because the rent is low.
I have seen lease documentation that is incorrect, with blanks, without exhibits, without dates. I have seen business owners who have never read their leases, who do not know or understand what is required of them and, thus, are immediately in default. The stories we all could tell are heartbreaking – it is a sad thing, and it is something that I plan to correct.
Q: How would you categorize the general health of today's commercial real estate sector?Â
Zelm: Part of the sector, such as multifamily rental housing and the industrial space, seems to be relatively healthy compared to retail and office. At least there is a demand and activity in those sectors. Retail is a disaster and will be for a number of years as retailers shrink, merge with others, go out of business and expand their Internet presence. Retail has been my specialty for the past 25 years, and I no longer see it as a viable specialty in commercial real estate.
