Real Estate Consulting Firm Proves Skeptics Wrong

November 24, 1991|By Erik Nelson | Erik Nelson,Staff writer

Dennis Lane's plan was a recipe for disaster, according to many who watched the county's commercial real estate market sliding off the edge of its 1980s plateau.

Lane, laid off as leasing director for a major commercial developer in July 1990, ignored the warnings, took everything he had, and in August 1990 invested it in a consulting business for prospective commercial tenants.

The Bryant Woods resident then convinced his friend, neighbor andresidential real estate agent David Noel to invest 90 percent of hisassets in the business as well.

"Dennis Lane is a nice guy, but they'll never make it," Lane remembers overhearing.

"Somebody said,'Those guys will be bankrupt in two months,' " Noel recalls.

The announcement of the company's start in a local business weekly was headlined "Brave New Real Estate Company."

But the performance of Noel-Lane Real Estate Advisors, and the company's unusual approach to real estate, has at least some of the skeptics eating those words.

When the company opened, commercial vacancy was high -- more than 20 percent -- and precious few tenants were looking to occupy that space. Since then, lenders have foreclosed or otherwise acquired more thana quarter of the county's office buildings.

Despite this climate,Noel-Lane in its first year settled leases for 22,000 square feet ofoffice space, 66,000 square feet of office/warehouse space and 300,000 square feet of warehouse space. The partners say they expect to end the year in the black. Next month, they will hire their sixth adviser, and they plan to add a seventh in January to expand into the Prince George's County market.

A "wall of shame" in the office displays the predictions they heard when they opened.

The company capitalizes on an idea they say is unique to the Baltimore-Washington corridor: representing only prospective tenants. The firm carries no property listings for developers, as most brokers do (Noel-Lane "advisors" hate being called "brokers.")

That setup may be the secret to their continued survival, Lane says.

"They're taking a concept that lots of other people have utilized successfully," said Frederick W. Glassberg, president of Columbia-based Crystal Hill Investments and Lane's last employer.

"He's got a good marketing sense," added Glassberg, who said he still regrets having to lay off Lane last year, when the company's financial difficulties forced it to let go more than half its employees.

Established brokers at such companies as W. C. Pinkard, KLNB, Casey & Associates and Coldwell Banker always have property listed, and thus are responsible for getting that property leased. Much of those companies' income depends on leasing the listed property, which can create subtle pressures for brokers to steer clients toward listed property, Lane says.

Noel and Lane say their detachment from developers allows the company to operate without such pressures, which in turn broadens the choices they can give clients.

Although the company suffered a first-quarter loss they blame on financial jitters during the Persian Gulf war, they have managed to make up for it.

Brokers competing for the business Noel-Lane has picked upwere hesitant to talk about them, but most are surprised that the company has survived.

W. C. Pinkard's Columbia manager, L. Jamie Smith, called Noel-Lane "a new company testing the waters with not much to lose."

"Their company is a reflection of the industry, which is(in) a trend toward downsizing development companies," Smith said.

Casey & Associates' Richard Pettingill said Noel-Lane was navigating uncharted waters, especially considering Lane's experience as a developer's leasing director.

"There's a big difference between representing a developer and being a broker," because the developer's representative does little legwork, which is essential to tenant representation.

But showing property isn't half of what Noel-Lane does, says Larry A. Ellison, an adviser who brings to the firm 24 years of experience directing construction, planning and financing of commercialdevelopments.

"More often than not we have to analyze the status of the developer," which can save tenants the aggravation of problemsif the building's lender forecloses on it, as has happened to more than a quarter of the office buildings in Howard County.

"We make sure the lease has the right clauses to protect them from unexpected proceedings," such as foreclosure, says Louis Schwartz, a Noel-Lane adviser who previously worked in the Manekin development company's brokerage division.

In addition, Ellison sometimes reviews construction records in "build-to-suit" deals, to make sure there are no hidden profits in construction costs.

"I always tell people, if all you want is free rent, you don't need to come to us," Lane says.

"Free rent" in commercial leasing is similar to the "free lunch" in that rents in the paid months or years are inflated to offset the free ones.In today's suffering market, however, the average rents tend to be lower than earlier years, Lane says.

Another service Noel-Lane offers is help in renegotiating leases originally drawn up in the developers' market of the late 1980s, one area where studying the health of a building's owner is critical.

The company is scouring the Washington and New York City areas, looking for golf courses for a Japanesecompany to invest in.

"One of our obligations to them is to advise them on whether this is a good investment or not," Noel says.

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