Most business people understand a real estate transaction: There is the selling side and a buying side, with realtors typically on each side. When a business is looking to lease office space in the Madison area, however, it is common for one person to represent both sides, the landlord and the tenant. Therein lies the impetus behind the creation of Commercial Tenant Advisors LLC (CTA). “We are commercial real estate advisors,” said Tim Rikkers, principal. “But we only represent tenants, never owners or landlords.” Rikkers said that by representing just one side of a deal, CTA eliminates conflicts of interest often inherent in typical commercial leasing arrangements.
Rikkers and his business partner, Matt Apter, had been in commercial real estate for years, working on opposite ends of the country. They met through their wives — friends from their days at Edgewood High School. A third partner, Josh Rikkers, Tim’s younger brother, also is a principal in the firm.
Together the three real estate agents pooled some personal funds to cover $6,000 in start-up costs to launch the company here.
Madison looked ripe for the taking. “We knew how [tenant representation] worked in bigger cities,” said Apter, “and we saw a potential for opportunities here.” Market research the firm conducted showed that many Madison business executives had previously lived elsewhere, increasing the likelihood that they might have been exposed to tenant representation before, a plus for CTA.
CTA assists companies looking to renew a lease or lease new office space. Since real estate can be the second highest fixed cost a company has, Rikkers said his company advocates for companies looking to secure multi-year, high-dollar investments. “Company executives are typically embroiled in running the business. They don’t have time to spend weeks or months trying to figure out where the real estate market is, where the opportunities are, or how to negotiate a lease.”
Since March, the company has closed seven deals, and has another dozen in the works. Rikkers said most of its business (70%) comes from new transactions, while 30% comes from securing lease renewals. “Some landlords still haven’t come to grips with the fact that we’re in a very, very soft market,” he said. “You can’t renew [leases] based on 2006 economics. We’re saving clients a tremendous amount of money [in negotiations], when, in many cases, the landlords didn’t believe their tenants would move.” Clients so far, he said, include biotech companies, medical device firms, mortgage companies, and nonprofits.
So how do landlords feel about tenant representation? “There can be some pushback on the front end,” admitted Rikkers, but he said the benefit is that they bring qualified, prepared and knowledgeable tenants to the table. “This streamlines the process.”
Brad Hutter, president of Mortenson Investment Group, has worked with CTA on several potential opportunities, though a deal has yet to be struck. From a landlord’s point of view, Hutter believes tenant representation is a valuable tool. “Many landlords don’t like tenant rep firms because they have to pay, but I think it’s great, because as a business person, I know the cost of doing business up front and can work it into the lease.”
CTA splits commissions with landlords, usually retaining 4% of a total deal. In its first three months, the company’s scheduled revenues exceeded $200,000. The company recently represented Sologear, LLC in its search for a larger facility. Said Sologear president Chad Sorenson: “What [CTA is] doing is fairly unique in Madison, because if an agent represents landlords half the time and tenants the other, it’s difficult to drive a hard bargain.”
