Conflicts of Interest

The Compensation Conundrum

Shouldn't you be confident that your real estate representative is working in your best interests?

Surprisingly enough, this basic expectation is often not realized by many businesses seeking expert real estate advice and support. The source of the problem lies in the traditional "landlord centric" business model of conventional real estate services companies.

Consider the Following:
75% to 90% of the revenues for the typical dual agency commercial real estate firm come directly or indirectly from landlord services. CBRE’s 2007 Annual Report, indicates that 69% of the company's gross revenues came directly from landlord related services.

Of the remaining 31%, classified as leasing commissions, a substantial portion actually originate from transaction activity based on landlord leasing agency engagements. These include:

• Leasing Agency Commissions
• Non-agency Leasing Commissions from leads sourced from direct tenant inquiries into other landlord agency properties



CBRE 2007 Annual Report

CBRE's data is cited only because it is a public company and the data is readily available. The basic picture is the same for any large dual agency firm and it applies, in equal proportion but smaller scale, to numerous smaller dual agency firms. The fundamental structure of these businesses creates an inherent landlord bias that does a disservice to business space users. This bias is compounded by the fact that large institutional owners, REIT's and wealthy individual investors control large portfolios of properties in numerous markets. These important relationships offer significant sources of ongoing revenue for the dual agency firms which act and seek to act as their leasing and managing agents.

Given these economic realities, it's not surprising that any single tenant relationship takes a back seat. This should raise some important questions for tenants.

Will the real estate agent representing you today....
be seeking business tomorrow from the party on
the other side of the negotiating table?

are they already representing that same party
or an affiliate on other properties you may also be
considering?

Is there a hidden agenda that conceals potential conflicts of interest beneath the surface?

Sweetheat – FASB 141, valued the real estate assets comprising 13 industrial manufacturing facilities located throughout the United States.

Gate Gourmet – FASB 141, domestic and international real estate valuation of 28 food preparation facility at major international airports in the United States and Europe.

Contact The Austin McGuire Company today to discuss how we can assist you with all your corporate valuation needs.

Knowledge Learning Corporation (KLC) acquired approximately 500 day care centers located throughout the United States from Aramark Educational Resources. This portfolio included both owned and leased properties.


To provide a high quality appraisal report utilizing two methods of value and provide for allocations between land, building and site improvements on a property-by-property basis.


Utilizing the leased portfolio as the basis of determining market rental rates each owned property was valued using an Income Approach model. The overall value was then allocated via a Cost Approach with the resulting land valuations from the model cross-checked with actual market transactions for 20 percent of the portfolio.

The result was a highly accurate (top down and bottom up) and cost effective valuation model sited by the valuation audit review committee as "…by far one of the most elegant and clean valuation models we have seen".

Download more sample engagements