Blog Archives
Part 11 – last Article blog
11. Lender issues: Landlords will frequently reject tenant’s suggested lease modifications because they would impair the “financeability” of the property, so the tenant must understand lender concerns. In general, the lender’s primary concern is the assurance of uninterrupted cash flow; anything that might jeopardize cash flow will be carefully scrutinized. Sensitive lease provisions generally include tenant remedies such as rent abatement, offset rights (deducting damages against rent) and lease termination rights.
Successful negotiation means more than just the rent As noted above, each step of the commercial lease process and each provision of the lease agreement provides ample opportunity to improve the deal, and conversely, expose the landlord or tenant to costly and unnecessary expense. The successful negotiation will focus on more than just rent. By reducing risks and avoiding surprises, the frantic calls for help may be a thing of the past.
Part 7 – Common lease components
Below is a discussion of several provisions found in a typical lease agreement, and a brief summary of the issues and negotiating positions for each party. These are critical to focus on in every lease transaction as each could ultimately make or break the deal. Please also see the sample tenant checklist available on my webpage for other issues to consider for each lease review.
1. Construction and tenant improvements: Almost every lease provides for the construction or installation of tenant improvements to the leased premises or the surrounding areas for the tenant’s use, ranging from construction of an entire building to moving a wall. There are aspects of this process, including design, approval, timing, and execution of the construction, that are common to all leases, and are often found in the Work Letter attached to the Lease (which is often fully negotiated with the LOI). Each aspect should be dealt with to avoid unpleasant surprises later. The Work Letter can be very specific and must accurately reflect the complete arrangement of work between the parties. Also, the construction contract and related documents (not just the plans and specifications) are often prepared by an architect or other non-lawyer who relies heavily on forms and fails to notice conflicts between the language of the form and the deal as understood by the parties. The lawyer must review the construction provisions and exhibits carefully, as most construction disputes flow from the failure of the parties to have a common understanding, as reflected in a clearly worded document, and all terms and conditions should be reviewed and fully approved by the project manager or other construction personnel before execution of the lease.
Blog Series, part 1
Both landlords and tenants seek help to resolve a dispute that has arisen with their commercial lease because they signed a misunderstood or poorly negotiated agreement. This is especially true of less sophisticated tenants who, for whatever reason, have chosen to sign the landlord’s “standard form lease” with few, if any, changes. Additionally, inexperienced landlords often use a form lease without fully understanding the terms and conditions imposed upon them.
The potential for dispute in a commercial lease can result from many things; however, the focus of lease negotiations is often limited to rent, concessions and other economic considerations. As a result, many important issues are often overlooked; misunderstood or under-negotiated (even by sophisticated landlords and tenants) that could materially affect the long-term success of the deal and are often the reason for their calls for help.
Commercial leases are often called “living” documents, as they govern the ongoing relationship of the landlord who owns or manages a property and the tenant who operates its business on that property. A lease is like a partnership agreement because it provides the parameters of a business relationship, and unlike many legal documents, the real work of a commercial lease commences when the document is signed and the deal is done. Negotiating the best possible deal is done throughout the entire leasing process, from the initial decision to move forward through lease execution. There are many significant terms and conditions that should always be considered when negotiating the deal. This article sets forth a few of the major lease provisions that landlords and tenants should focus on, but is not intended to serve as a substitute for consulting with a real estate attorney.
It’s official: Target taking over Tamarac Square in Denver
Southeast Denver‘s Tamarac Square will be razed and replaced by a Target store and other retailers, Developers Diversified Realty Corp. announced today.
The Beachwood, Ohio-based firm characterized Tamarac Square as a “non-income producing parcel” that will be sold to Target for construction of the store.
Developers Diversified said it intends to redevelop adjacent retail space to accommodate “demand for additional high-quality retailers.”
The company, which owns and manages approximately 520 retail properties around the country, said it is also razing the Terrell Plaza Shopping Center in San Antonio and selling that property to Target.
“The redevelopment of the two non-income producing assets into prime shopping centers is a perfect example of the continued execution of our redevelopment strategy,” said Paul Freddo, Developers Diversified’s senior executive vice president of leasing and development.
Freddo said that Tamarac Square is currently 90 percent vacant.
The redevelopment will provide Target access to a market exceeding 720,000 people within a seven-mile area, said Freddo.
He said that upon completion of the 135,000-square-foot Target store and the renovation of the adjacent 33,000 square-foot convenience center, the project will be 98 percent leased.
The combined gross investment for the Denver and San Antonio projects is $40 million, according to the company.
Howard Pankratz: 303-954-1939 or hpankratz@denverpost.com.
tylufman.wordpress.com 