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AFE November/December 2013 : Page 18

Facilities Engineering Journal’s Expert White Paper from UGL WHAT HAPPENS WHEN INTERESTS CONFLICT IN THE SELECTION OF A REAL ESTATE SERVICE PROVIDER? Ŷ A non-conflicted firm reduces a client’s risk and offers full transparency in all aspects of the transaction --negotiations, analytics, documentation and fee disclosures --making a non-conflicted provider the safest and most viable choice. The aim of a conflicted provider boils down to increasing landlord revenues by maximizing rents to the fullest extent possible and managing properties to the benefit of the owner while ensuring prospective tenants “see” their principals’ properties. “Seeing every deal” has become their standard industry catch phrase. As a result, these hidden objectives often trump the conflicted provider’s obligation to the occupier and will result in the following conflicts: Ŷ Ŷ Renewals create a dilemma as taking occupancy out of an investor/client’s building can severely damage that relationship. The dual agent may have incentive to bring a client’s occupancy need to landlord-represented properties in order to preserve or win facility, project leasing, or advisory assignments. Dual agents may not provide adequate exposure to available subleases where they compete with landlord-represented (direct) available spaces and in fact, may be an impediment to developing positive negotiating leverage. Ŷ The mix of tenant, investor and landlord services bundled by these providers can also lead to financial or regulatory scrutiny. The non-conflicted firm is committed to maintaining the highest standards of fiduciary care through each and every phase of the engagement. The example below illustrates the disparity in fees that creates the fundamental dilemma conflicted firms operate under: the earnings multiple received from recurring landlord fees versus the commission earned through tenant representation. Non-conflicted representation offers a clear distinction and measurable results for occupiers by providing the following benefits: Ŷ The full market range of available opportunities is always open to the occupier without conflict. A non-conflicted firm is able to research, develop and pursue with tenacity the broadest range of market alternatives for any real estate requirement, anywhere. This translates into the most complete due-diligence effort possible for the occupier’s real estate transactions. A non-conflicted approach avoids any disparity in fees that is a fundamental dilemma for conflicted firms: the earnings multiple received from recurring landlord fees (see above chart) versus the commissions /fees earned through tenant representation. Ŷ 18 November/December 2013 ■ Facilities Engineering Journal ■ www.AFE.org

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