Finding Stability in Tulsa Real Estate: Less Glamorous Leasing, Management Contracts Keep Cash Flowing
Davis, KirLee, THE JOURNAL RECORD
Although Tulsa Hills Shopping Center offers only 8-percent vacancy, Mendy Parish considers it an achievement to take over leasing chores for the growing west Tulsa complex.
"There will always be work to do, even in a project as successful as this one," said Parish, a Tulsa retail specialist with CB Richard Ellis of Oklahoma. "Tulsa Hills is one of the shining jewels in this market."
Terry Argue faces the opposite challenge. After almost 18 years managing downtown Tulsa's historic Mid-Continent Tower, Argue expects to lose that contract when that 321,500-square-foot office complex hits the Tulsa County sheriff's auction block.
"It's almost inevitable," he said, noting most new owners change building managers after signing the deed. That's how Parish landed the Tulsa Hills job, after the Inland Real Estate Group of Oak Brook, Ill., bought the three-year-old center last month from Collett and Associates for $54 million.
Those cases represent the triumphs and pitfalls of property leasing and management. Lacking the "home run" payoffs of investment brokering, these sides of commercial real estate often gained far less attention. But as the "go-go" property sales dried up under this recession, the steady, day-to-day business of leasing and management spelled survival for many firms.
"The most stable income is with the management side of the business," said Jim Parrack, a senior vice president with Price Edwards in Oklahoma City. "You make a monthly fee on all of the projects that you manage. As long as you do a good job, that is a relatively stable part of business."
That is demonstrated by Argue's 18 years at Mid-Continent.
While Tulsa-based Argue Properties handles other properties, Mid- Continent makes up the majority of its cash flow. At 88-percent occupancy, with little turnover, the two buildings making up that tower provide Argue with both a steady management fee and reimbursement for certain expenses.
Some headaches come with such contracts, from unclogging toilets to working through emergencies. Argue still cringes at memories of the 2007 ice storm, which shut off power to four-fifths of Tulsa.
"Retailers depend on Christmas sales," Parish noted, "so if you have ice on the sidewalks, you have to get that out of there. Their sales depend on it."
But Argue appreciates the close relationships property management allows him to build with both co-workers and tenants, and the trust they put in his confidence and services.
"They're just always a joy to be around," he said. "Most are entrepreneurial. They're creative. They have tremendous energy. They're great people to work with, to try and provide a quality service to."
The cyclical thing
Offering leases represents the middle ground between management and brokering.
"With the leasing silo, income varies more with what's going on with the economy and the market in general, but you always have something going on," said Parrack. "There's people doing their leases or there's people doing their renewals."
That's the angle that keeps Parish intrigued.
"Assuming I do a good job and they keep me, it has the potential to have commissions forever," said Parish, who draws 80 percent of her income from the leasing space at 30 centers.
A new five-year lease would typically provide her checks for 6 percent its total value, half upon execution and half upon occupancy.
"It does end up being kind of an ongoing cyclical thing," said Parish. "You constantly have business because you constantly have turnover. No matter how good your center is, there will always be turnover."
The star performance of the 700,000-square-foot Tulsa Hills puts pressure on Parish to maintain that momentum, with Charlotte, N. …