Why I Prefer Not to be Called a Landlord
Those of us who are passionate about commercial real estate and property management need to rethink our use of the words “landlord” and “tenant.” The terms no longer describe the relationship needed for property owner and tenant-partner to thrive.
If you share this philosophy, you’ve likely bristled when someone used the term “Chicago landlord” to describe you or your occupation. More often than not, the word landlord is used as a pejorative. Indeed, when you see “landlord” and “tenant” in a news headline you can be fairly certain that what comes next is not going to be favorable to the owners of that property.
How did the word landlord evolve?
The term landlord has its origins in Medieval Europe. As the Roman Empire receded through the 9th Century BC, chaos descended across many parts of Europe. With no central power to bring order and protection, villages throughout Europe became easy targets for thieves, warriors and invaders. It was in this chaotic environment that the feudal system of landowner, knight, craftsman and serf emerged.
Landlords as protectors of those living on the land
In response to the plunder of villages from the 8th to the 12th Centuries, landowners and those living on the land, were joined in an alliance. The relationship was fairly straight-forward. Landowners provided protection and some form of order for those living on the land (serfs) in exchange for a portion of the crops that serfs planted on the landowner’s estate.
In these Medieval times the landlord was the justice system, the protector and the granter of all rights. Tenants (serfs) were offered land to farm at the pleasure of the landlord. The “rent” was a portion of the crops that were grown on the land. Any improvements to the land, such as a house or barn, were constructed and paid for by tenants. The landlord had no responsibility to maintain or improve structures built on his land. Because it was the land that held all value, a tenant was expected to pay rent (crops) regardless of any exigent circumstance. If a serf’s home or barn burned to the ground, the rent was still due.
From Tenant to Tenant-Partner
The time has come for forward-thinking professionals to embrace a new, more useful way to describe the relationship between property owners and those who lease office space. At Boardwalk Capital Holdings we like to use the phrase “tenant-partner” to describe those who favor us by choosing our buildings for their home. We believe the term tenant-partners more appropriately reflects the balanced, mutually beneficial relationship between owner and lessor.
More than ever, the value of a property is tied not only to the amount of rent collected, but also to the quality, prospects and cachet of the companies to whom space is leased. The Merchandise Mart is replete with examples of the halo effect that a high quality tenant can have on the value of a property.
In 2012, after technology incubator 1871 had opened in the Mart, Google announced that Motorola would be moving its 2,000 employees from the suburbs to 600,000 square feet in the Mart. If the Mart was good enough for Motorola, it was good enough for PayPal’s new acquisition, Braintree, which gobbled up 60,000 square feet in 2013. Soon after, Yelp, expanding from its temporary space, committed to a long-term lease of 50,000 square feet at the Mart. Today over one-third of the Mart space is leased by technology companies at rates substantially higher than the showrooms whom they have displaced.
It’s estimated that Vornado’s 1998 purchase of the Merchandise Mart for $384 million is now likely worth $1.0 to $1.2 billion, according to a 2014 Crain’s article. No doubt much of that increase was due to the Mart’s ability to attract dozens of tech clients on the heels of Motorola’s move.
Why you treat a tenant-partner differently than you treat a tenant
At Boardwalk Capital Holdings, our ability to attract high profile companies to our properties depends upon two things. First, we extend ourselves to offer contractual, financial and construction solutions that are both creative and unique. Because we value both the tangible and intangible benefits that the right tenant-partner can bring to a building, we see beyond the monthly rent check.
Second, once they’ve moved into their new space, we offer our tenant-partners the type of personalized property management services that would be difficult for a larger “Chicago landlord” to deliver.
For example, our team takes the time to get to know and understand each tenant-partner’s business so that we can anticipate their needs, rather than simply being reactive. When work is required in the building, our engineers understand the importance of keeping disruptions to a minimum and we work with our partners to minimize that burden.
Each Boardwalk Capital Holdings building has a dedicated property manager as a single point of contact. This insures that our tenant-partners always know whom to reach with a problem or an opportunity to improve the building or our service. Because great service can mean different things to different people, we offer automated service requests for those who seek convenience, but also provide a direct line to the property manager for others who would rather speak directly with the person in charge.
In the past, commercial property owners saw tenants in a simplistic, monochromatic way. Once a lease was signed, the landlord mentality sought to minimize building maintenance and leasehold improvements. Each dollar spent on the property was seen as a dollar deducted from the rent check. Reducing costs was considered the only way to improve profitability.
Because Boardwalk Capital Holdings views lessees as partners in the growth of the property’s value, we’re always open to investing in our service and facilities if it will help our tenant-partners – and the value of our property – grow.
In an era when time-worn business models are being blown up every day, perhaps it’s time for commercial real estate investors and managers to change the way we talk about and approach our relationship with those who lease our properties.
By Arthur Holmer, Chicago Landlord Property Owner and Manager