“If you’re growing really rapidly, you’d be better off not owning, because it does give you the flexibility,” he says. “Your capital is going to be put to much better use growing the company, rather than being tied up in a building. In fact, you should even be careful that you don’t get locked into too long of a [lease] obligation. If you’re going to get locked in on a primary space for a long period of time, you had better have maximum flexibility on the adjacent spaces, too.”
That’s how Next Level Café has played its cards. Anderson says his company’s current 6,000-square-foot space (the third the firm has inhabited since 2000) was bought to accommodate a 50 percent increase in employees. But just to be safe, Anderson secured first right of refusal on the other 6,000 square feet in the building.
Surprisingly, Anderson negotiated the lease deal himself.
“We weren’t actually planning on moving from our previous place,” he recalls. “We were going to stay where we were [and expand]. But we happened to stumble on another location with a great exterior, a great price, and no middleman. The owner of the building served as the property manager, so he was able to cut a lot of the rates. We were just in the right place at the right time.”
Should others emulate him? Probably not, he says. In any other circumstance, he would have hired a company like Nicoll’s to sort everything out. And anyway, it would be misleading to say that he did it alone. “While I didn’t have anyone paid on retainer to help do the search, I work with a lot of folks who did give me some good advice,” Anderson says. “I’m in a networking group with someone from United Properties. My attorneys looked at the lease agreement. We used several other lease agreements as our standard, for comparison, to make sure we had all of the right clauses in there. So the fact that we were fortunate enough to have a lot of those services given to us for free should not undermine the value of such experts.”
Whether to buy a property is an entirely different question. Anderson says he has discussed the possibility with some colleagues. “I’m not really interested in getting into the real estate business,” he says. “But I think when you look at the cost of ownership and the equity involved and other factors, it probably becomes a more significant decision around 7,000 to 9,000 square feet under lease. At that point, if you look at the mortgage cost versus the lease cost, the benefits of ownership may outweigh the benefits of leasing. However, you lose some mobility. You’ve got to weigh the pros and cons.”
Restoration Professionals felt that the pros were significant. Because the company works in emergency response, a central location was important. Herland says her firm worked with the Port Authority in St. Paul to acquire heavily discounted land (for $1) in return for promising to hire 20 city residents over the next 10 years.
