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NOEW: Real Estate and Leasing Tips for Emerging Companies
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Transcript of NOEW: Real Estate and Leasing Tips for Emerging Companies
Real Estate and Leasing Tips for Emerging Companies
Chip LeyensShareholder
Baker Donelson
504.566.8628
2www.bakerdonelson.com© 2013 Baker, Donelson, Bearman, Caldwell & Berkowitz, PC
Some Basics
• Why buy when you can rent
• Permits (recommended) & Zoning (check it)
• IT issues – don’t get stuck with a fax-modem
• Take it for a test drive – try a sublease or shared space arrangement
3www.bakerdonelson.com© 2013 Baker, Donelson, Bearman, Caldwell & Berkowitz, PC
Sublease: Kind of like a starter home
• Good way to get your foot in the door and not pay a lot
• Sublease rates generally are less than direct lease rates
• Do not put any of your $ into sublease space because if your sub-landlord defaults, you are out
• Have to figure out space and service allocation, as well as access
• In a soft market, sublease space is available and subleases can lead to direct leases with landlord
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Not just location, location, location
• Negotiate ability to take on additional space and get out early if you need to
• Short initial term with good expansion,renewal and termination options
• Flexibility, flexibility, flexibility
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Expansion options: Lots of ways to structure
• “Hard” expansion option identifies specific space at a specific rate• “Floating” expansion option identifies a certain amount of space in
various potential locations within a building• Right of first offer• Right of first refusal• Notice of availability of space• Be a good tenant
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Renewal options:
• Setting renewal rent up-front vs. determining it at a later time (kind of like fixed v. variable interest rate)
• Don’t get hung up by landlord renewal language re: no defaults
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Termination options:
• Try to limit payment to reimbursement of landlord’s unamortized up-front costs (commissions and tenant improvement allowance) over initial term of the lease
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Pricing
• Try to get a cap on variable costs in the lease or a gross lease (gross v. net lease)
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Build-out work:
• If you are getting work done in the space, try to get the landlord to do it (unless you’re a contractor)
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Tenant allowances = landlord financing of improvements
• It usually gets paid back by tenant over time as part of base rent
• Depending on market, no free lunch
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Get a broker who knows the market:
• Don’t rely on the landlord’s broker (or on your lawyer to work the numbers)
• Start early with a good local broker who knows the market
• Make sure broker has experience for applicable type of space: e.g., office, retail, warehouse, medical and/or flex space
12www.bakerdonelson.com© 2013 Baker, Donelson, Bearman, Caldwell & Berkowitz, PC
Legal issues:
• Clearly drafted lease that identifies each party’s respective maintenance, payment and other obligations
• No gotcha clauses that will give landlord undue leverage (e.g. rent acceleration)
• Insurance and indemnity issues in leases are usually the most difficult
13www.bakerdonelson.com© 2013 Baker, Donelson, Bearman, Caldwell & Berkowitz, PC
Want LEED certified space? Tell your broker!
• Different types and levels of LEED certification
• LEED building does not necessarily mean cost savings on rent (but there could be other benefits)
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Assignment:
• Make sure it’s broad enough to permit change in control, sale/merger, etc., without landlord’s prior consent
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Guaranty:
• If you have to give one, try to include a burn-down provision in it
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Flexibility
• Should include parking and operating hours - don’t get jammed on after-hours HVAC
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Questions