4A — May 24 - June 13, 2019 — M id A tlantic
Real Estate Journal
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M id A tlantic R eal E state J ournal
Three SVNAdvisors on track for advanced designation
By Jessica T. Zolotorofe, Ansell Grimm & Aaron Seven lease provisions for a landlord to watch out for
best plan starts at entryways with controlling access to the office/building. This ensures that everyone entering the building has a legitimate need to be there. While it will not prevent a current member of an organization from attacking his or her own organization, it will slow or prevent an outsid- er attack. Video surveillance is another key ingredient in that it can provide situational awareness and enables you to not only observe activity throughout the facility in real time, but also offers the ability to record activity for forensic purposes and review. Mass No- tification Systems (MNS) en- able communication with large groups, it can be in the form of loudspeakers, telephone messaging, electronic mes- saging displays and wireless duress buttons to name a few. Gunshot detection systems can help identify and locate gun- shots almost immediately and can be integrated to alert law enforcement. Interior shelters in the open, glass walled areas of today’s office present a chal- lenge but with the advent of Micro-layered, tear resistant film and Impact Protection Attachment Systems (while they are not bullet proof), can provide the much-needed time to slow down the shooter until help arrives. It should be noted that an analysis of active shooter events showed there is no evidence that a previ- ous active shooter has ever FAIRFAX, VA — SVN | Miller Commercial Real Estate Advisors Andy Ball and Tonney Insley and asso- ciate Advisor Kelly Svehlak took the week long CCIM 101 Course: Financial Analysis for Commercial Investment Real Estate. CI 101 is a foun- dation class for real estate practitioners at a time when risk mitigation, pricing, and cycle assurance have become critical to investors. This course introduces the CCIM Cash Flow Model, a tool for ensuring your investment decisions are based on wise finance fundamentals. During the course, they learned how to use key financial concepts such as the Internal Rate of Return, Net Present Value, Cap Rate, Capital Accumula- tion, and the Annual Growth Rate of Capital to compare different types of commercial real estate investments. CCIM stands for Certi- fied Commercial Investment
o f t e n t ime s national ten- ants will not allow renego- tiation of any memorialized terms once the LOI i s signed. Thus, it is always W
many tenants, to notify each tenant that they are late in complying with their monthly, recurring obligations under the lease. A good compromise is of- fering a tenant written notice for the first monetary default, and thereafter, late fees can immediately be assessed and non-payment will constitute a default without further notice. (6) Confidentiality Often overlooked, a critical termof any lease agreement, es- pecially those for multi-tenant centers, is the confidentiality provision. Other than tenants’ agents, lawyers, accountants, and lenders, tenants should not be permitted to disclose any of the terms of their lease agree- ment. Particularly their rental rate and any concessions, such as free rent or allowances, should be kept confidential as to not cause other tenants within the center to attempt to renego- tiate their leases, which could cause a significant problem for a landlord. (7) “Go Dark” and Recapture Sometimes tenants will re- quest a “go dark” provision, which will allow them to cease operation at the premises so long as they continue to abide by their other obligations under the lease. This way, if a tenant’s business is not succeeding at the location, and it is not financially favorable to continue to pay the costs of conducting business, a tenant has the option of avoid- ing a default under the lease, while still closing its operation at the premises. Especially in a multi-tenant center, this can be detrimental to a landlord who relies on the tenant’s foot traffic, or who does not want a dark unit for years, which may render the center undesirable to other po- tential tenants. In the alterna- tive, it is a better scenario than the tenant defaulting and not paying the rent at all. A landlord should weigh the advantages of continuing to receive consistent rent with having a dark space in the center. These may not all be deal breakers, but they are a few provisions to keep an eye out for when opening negotiations. Leases are complex and each lease has unique terms and provisions, so Landlords should always get a lawyer involved early on in the process to en- sure that their interests are fully protected. Jessica T. Zolotorofe is an associate with Ansell Grimm & Aaron.
hile letters of in- tent are not bind- ing in many states,
ing assets once the lease is sur- rendered, so the landlord will have no recourse upon a de- fault by the new tenant. Plus, the original guarantor of the lease will probably want to be released. A good compromise is to agree to release the guaran- tor if a replacement guarantor is provided by the assignee who has equal or greater net worth to the current guarantor. This provides the landlord with the same bargain for which they initially benefitted. Additionally, as a condition to assignment of the lease, the tenant should have to pay all of landlord’s costs incurred in connection therewith, including legal fees to review the assign- ment, and other expenses, for example, an architect’s review of the assignee’s plans for reno- vation of the premises. (4) Termination Rights Also known as the “kick-out provision”, many national ten- ants require a right to termi- nate their leases if their sales do not meet a certain threshold after a specified period of time. Tenant lease forms often pro- vide that the tenant can termi- nate at any time after a certain time period, for example, the sixtieth month. It is very diffi- cult to sell or finance a property with a lease that can end at any time, even if there are seem- ingly many years left in the term. Thus, a landlord should require its tenants to exercise their termination right within a short window. To continue the above example, notice would have to be provided between the sixtieth and sixty-sixth months of the lease term. In the event that a tenant is going to have the right to ter- minate pursuant to the lease, a landlord should attempt to negotiate a termination fee, in addition to reimbursement of the then unamortized portion of (i) the broker's commission paid by Landlord in connection with the lease, and (ii) any al- lowance paid by the landlord to the tenant for build-out costs. (5) Monetary Defaults Tenants will often make the argument that monthly rent payments can get lost in the mail, or there can be a clerical error that causes a payment to be late, and thus they require written notice from landlord before any penalty can be imposed. However, landlords should argue that it should not be their responsibility, espe- cially a landlord that manages
breached an interior, standard commercial door (metal framed with solid wood core). If one is available such as a file room, copy room, bathroom or any room having a commercial grade locked door could work. Having multiple exit options readily accessible are by far the safest way to negate an active shooter event by leaving the area. These exit options should be easily identified using way finding signage or having emergency evacuation routes posted, and where pos- sible the use of metal filing cabinets lining these escape routes can give additional “cover” when fleeing an active shooter incident. Escape Drills should also be incorporated into all Emergency Prepared- ness plans similar to Fire Drills in order for response to an emergency to become as automatic as possible. As a last resort Fight , defend like your life depends on it, because it does. If you cannot deny ac- cess to the shooter, or avoid them by hiding or fleeing, use anything and everything to defend yourself. Raymond Willer is an account manager for HF Planners, LLC. *https://www.bls.gov/news. release/cfoi.nr0.htm **Source: FBI, a study of Active Shooter Incidents in the United States between 2000-2013 *** https://www.fbi.gov/ file-repository/active-shooter- study-2000-2013-1.pdf/view The group took the class in Fairfax, VA. “This class pro- vided valuable information that will help us in assisting clients to make informed in- vestment decisions. Having a better understanding of all aspects of the real estate cycle increases our ability to add value and provide the best advisory services possible”, said Kelly. Member. The CCIM desig- nees are recognized as lead- ing experts in commercial investment real estate. CCIM designees are able to help their clients minimize risk, enhance credibility, make informed decisions, and close more deals.
Jessica Zolotorofe'
advisable for landlords to have an attorney review before it is executed. That being said, the following is a guide for land- lords to follow when beginning negotiations with a tenant. (1) CAM caps Tenants will often require a cap on the annual increase of their common area expenses. Landlords should ensure that only “controllable” expenses are capped, which should exclude snow, ice, insurance, and tax increases. Additionally, it is not un- usual for a tenant which has many locations to only review common area maintenance charges when either the ten- ant is ready to renew the lease, when estoppels are requested, or periodically over numerous years. Leases should provide that the landlord must be notified of any dispute in the accounting of common area expenses within twelve months after receipt of landlord’s recon- ciliation report. This will pro- tect a landlord from having to potentially reimburse a tenant a large sum after many years of an inadvertent miscalculation in its maintenance charges. (2) Landlord’s Work If the lease contains a re- quirement for a landlord to complete certain work prior to delivering possession to the tenant, it is important for the lease to provide that the con- dition to delivery is only that landlord’s work be “substan- tially complete”, which should be defined to exclude minor punch-list items, construction on other parts of the shopping center which are not immedi- ately adjacent, and weather dependent items such as land- scaping, provided same do not materially interfere with Ten- ant’s ability to perform tenant’s work or to open for business. (3) Assignment of Lease If a tenant is permitted to assign the lease, the original tenant will typically remain li- able, but that entity will likely be dissolved or have no remain-
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