Negotiating Commercial Leases 2013

Negotiating Commercial Leases 2013
Credit Status: Submitted
Total Credits: 12.50
Ethics: 1.00

General: 11.50

Day One: 9:00 a.m. - 5:00 p.m.

Morning Session: 9:00 a.m. - 12:15 p.m.

9:00 Changing Lease Forms and Negotiating Tactics in the New Improving Economy

  • Lease forms expanding again
  • Econometric layering of “theft by lease” – re-bundle operating expense into fixed rent – anticipate inflation of escalations
  • In market recovery – Landlord’s need to close deals quick – tenants at premium
  • Owners need to commence rent more quickly – reduce leasing legal fees
  • Lease takeover loan/agreements tools
  • Accelerate the many moving lease commencement dates – remove the risk
  • Mock negotiation on getting all superior interests to the table

Michael E. Meyer, John Busey Wood

10:00 Unanticipated Limitations in Long-Term Planning

A. Assignment and Subletting

  • An overview
  • Permitted transactions
  • Recapture rights and profit-sharing
  • Recognition agreements and consents
  • Structural impediments to assignment and sublease rights

B. Creating Flexibility, Evaluating Your Options and Negotiating the Deal

  • How to create flexibility in the lease?
  • Renewal and expansion rights, including rights of first refusal, rights of first offer, and fixed expansion rights
  • Early termination rights and partial kick outs

Nancy Ann Connery, Michael E. Meyer

11:00 Networking Break

11:15 Strategies and Tactics for Negotiating Today’s Tenant Options

  • Fixed versus floating expansion spaces; setting the triggers, delivery windows and response times
  • Fixed rental rate versus then-current market rent; when should landlord have to re-offer declined right of first refusal space?
  • Overlapping and cascading options; creating multiple rights – structuring around other tenants’ existing and future senior rights
  • “Personal” options, minimum occupancy requirements and other ways to forfeit a tenant’s option
  • Calculating termination and contraction fees; reconfiguring a multitenant floor, who pays and who chooses?

Joanne Franzel, Steven D. Klein

12:15 Lunch

Afternoon Session: 1:15 p.m. - 5:00 p.m.

1:15 Use of “Off-Balance Sheet” Financing; Ground Leases – Fundamentals of Structuring for Buildability and Financing

A. Good Guy Guaranties and Takeover Leases

  • Off-balance sheet – springing obligations
  • “The gap” period obligations – “backdoor expanded personal liability”
  • Bankruptcy impact
  • Hot topics – backdoor liability accelerations – “lease takeover triggers!”
  • How to secure the payment and performance of the “lease taken over”
  • Representing a landlord in negotiating a restructuring of a tenant lease
  • Emergence of the equity or cash flow participation lease
  • Credit enhancements
  • Use of letters of credit

B. Ground Leases – Fundamentals of Structuring for Buildability and Financing

  • 99 years is a long time; periodic rent resets and other special clauses addressing the unknown
  • Tenant rights at their most extensive; the true economic owner; protecting the leasehold mortgagee; special cases of condemnation and casualty
  • Issues in ownership transition; recognition agreements for subtenants; reversionary rights and end of the term decision-making

Steven M. Alden, Michael Kerstetter, John Busey Wood

2:45 Hot Topics for Dealing With Long-Term Lease Structures, Audits and Credit Support

  • Where are we with new FAS-13 and what is the impact on the structure and negotiation of long-term leases? What is the importance of tenant’s audit rights?
  • Hear how vacancies and historically incorrect gross-up adjustments are serving to
    – overcharge in-place tenants
    – understate landlord’s NOI
    – understate management costs and taxes for base years
  • Learn how “green leases” and “green buildings” are leading to the development of new profit centers for landlords – new “green maintenance” laws
  • Find out how REITs are shifting corporate office costs to building tenants via allocations at an unprecedented rate. How is this impacting tenants?
  • Understand how new insurance products are being used to transform lease structure
  • Letters of credit – don’t get surprised later by the “fine print”!

Edward Harris, Steven Serota, John Busey Wood

3:45 Networking Break

4:00 Ethical Gaps, Mishaps and Traps in Real Estate Practice

  • Engagement letter gap
  • Conflicts issues arising from outside counsel’s dealings with in-house counsel acting as owner/officer of property management company, and independent counsel versus in-house counsel acting as a party to the transaction
  • Virtual office, multijurisdictional practice/unauthorized practice concerns/confidentiality problems
  • Bottom line for attendees: what is my practical procedural strategic plan to deal with conflicts, keep the fee and keep the client?

Devika Kewalramani, Michael E. Meyer, John Busey Wood

5:00 Adjourn

Day Two: 9:00 a.m. - 4:30 p.m.

Morning Session: 9:00 a.m. - 12:45 p.m.

9:00 Challenges in Building Today’s Tenant Improvements

  • Practice tip! High value property – selling pieces of the property – future condominium declaration
  • Hot topic – later creation of multiple superior interests and impact on expansion and option rights
  • Timeline of creation of interests – impairment of rights – securing the landlord work/$
  • Negotiations of the SNDRA – “R” is for full recognition – deal with the lender in beginning – abatements and credits for landlord’s work funded by tenant loan!
  • Purchase extensions and options may not work after conversion
  • Bring the lender and security interest holders to the table first – secure the landlord’s work funding and related rental credits/abatements – hot topic – loss of abatements and offset protections
  • Owner in workout will not fund TI or brokerage commission – tenant the “equity investor”

Michael E. Meyer, John Busey Wood

10:00 Complex Real Estate Issues: Arbitration vs. Litigation

  • Costs of litigation and discovery as well as absence of cases or judgments
  • Establishing minimum qualifications for arbitrators in arbitration provisions and selection process
  • Hot topics – current increase in “baseball panel arbitration”
  • Use of advocate arbitrators – use of one neutral or three neutrals
  • Impairing and invalidating the award
  • Compartmentalize the process – surgical arbitration for a clause only
  • Creation of the arbitration forum – drafting good and bad clauses
  • Practice tip: hidden issues in fair value market determinations

Michael A. Marra, Elizabeth J. Shampnoi, Thomas M. Ventrone, John Busey Wood

11:30 Networking Break

11:45 Dealing With Large Hidden “Big Ticket” Items

  • The “grandfathered” laws and enacted not effective late triggers – new tenant filing plans – pulling permits – new laws for sprinklers and electric meters
  • Pre-existing noncompliance permit delay for existing building or space violations
  • Triggered violations from deferred but enacted laws on filing of plans and demolition
  • Costs included in CAM and operating expenses/capital disbursements – landlord build to suit but no cash and “under supervision” – how to protect the “turnkey”
  • Negotiating “work/TI” funding/completion rights and with the lender or special servicer and for “recognition of landlord’s work abatements and credits” – tenant pays the broker for the servicer? Future “delivery space” TI funding
  • Current failure to analyze and assure the “attached sketch” – compliance, use, repair obligations and “the missing terrace! . . .
    the added building systems!”
  • Sprinklers, electric meters and VAV boxes – analyzing landlord’s “base building” inclusions
  • Mock negotiation

Michael E. Meyer, Jacqueline A. Weiss, John Busey Wood

12:45 Lunch

Afternoon Session: 1:45 p.m. - 4:30 p.m.

1:45 Hot Issues in Retail Leasing in the Current Environment

  • Use clauses and tradenames
  • Exclusive use rights
  • Opening and operating covenants
  • Co-tenancy rights
  • Assignment and subletting
  • New issues facing landlords and tenants in the current retail environment
  • Use of “pop-up occupancies” in malls – impact of “temp operating agreements”
  • When the co-tenancy and “kick-out” for low gross sales needs confirmation – problems of enforcement
  • Early delivery and opening agreements while lease is being negotiated

Theani C. Louskos, M. Rosie Rees, John Busey Wood

3:15 Networking Break

3:30 Issues Surrounding Insurance and Damage and Destruction

  • Effect of the financial crisis on insurance
  • Who insures the insurer?
  • Coverage of catastrophic risks – coordinating the insurers
  • What the landlord needs and what the tenant needs
  • ACORD forms now truly worthless! Use of binders?

Christine Chipurnoi, James A. Fenniman, Arthur E. Pape

4:30 Adjourn

11/7/2013 9:00 AM - 11/8/2013 4:30 PM
Columbus Bar Association
175 South Third Street
Suite 1100
Columbus, Ohio 43215

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