Book Read Free

Suite Deal

Page 19

by Alice Devine


  XYZ, the manager of The Park, currently manages in excess of five million square feet of office space in the Bay Area and maintains the services of full-time, on-site property management and maintenance staff at Main Street Office Center. XYZ takes pride in its ability to attract major national firms to its high-quality office developments. Main Street Office Center has attracted such diverse corporate headquarters as [name one, two, or three prominent companies if you have any headquartered at your space]; in the roster of regional offices are included such firms as [name your most prominent tenants—especially those that are representative of the prospective firm].

  Location

  As shown on the enclosed site plan, Main Street Office Center is located at the confluence of Interstate Highways 1 and 2, and it is within a half mile of US Highway 123. Main Street Office Center provides easy access to any point in the Big City area and has unparalleled access to Big City International Airport, which is less than three minutes away.

  Main Street Office Center is serviced by three separate metro lines connecting Main Street Office Center with the Big City Transit Station. Main Street Office Center’s excellent connections will only become more convenient in the future as additional stations are added to connect [name any transportation improvements under construction].

  Amenities

  The Park features several delightful eateries including ABC Deli, ABC Restaurant, and 123 Restaurant with indoor and patio seating, and several other choices in the nearby Convenient Shopping Center.

  The Relaxing Hotel provides The Park with superior on-site lodging at an affordable price. The hotel features its own complimentary airport shuttle, meeting facilities, a spa, and a beautifully landscaped courtyard and an enclosed swimming pool. Your business associates will appreciate the convenience of the hotel’s close proximity to your Main Street Office Center offices.

  The Park also includes a myriad of support facilities including banks, savings and loans institutions, and convenient neighborhood services in the adjacent Convenient Shopping Center.

  Finally, a completely equipped fitness center with lockers, sauna, and shower is located in The Park for tenants who enjoy the relaxing benefits of daily workouts.

  123 Main Street—The Building

  123 Main, a first-quality office building completed in late 2000, is composed of approximately 200,000 square feet on four levels, including 4,000 square feet of outdoor terraces overlooking The Park’s park-like setting. Its impressive two-story lobby/atrium features elegant finishes, which include Brazilian cherrywood floors accented with rich granite, etched glass, and a John Doe bronze sculpture. Computerized building systems provide extremely cost-efficient operating and enhance a tenant’s individual safety and comfort.

  Initial Premises

  The leased premises for Tenant will be approximately ___ rentable square feet consisting of Suite 456 (“Premises”). The subject area is highlighted on the enclosed floor plans.

  Note: Some landlords also specify usable square footage, but because rent and operating expenses are all based on rentable square footage, this proposal states only the rentable square footage.

  Expansion Option

  Note: This is not a standard proposal item since it’s a landlord concession. Sample language is included here, but many landlords do not offer this in standard proposals.

  Tenant will be granted an option to lease _______ (“Expansion Premises”). Tenant must notify Landlord in writing of its election to exercise its option with respect to the Expansion Premises no later than _____ (___) months prior to the date of the lease expiration.

  Right of Offer Space

  Note: This is not a standard proposal item since it’s a landlord concession. Sample language is included here, but most landlords do not offer this in standard proposals.

  We will offer Tenant the following one-time right of offer, as indicated on the attached floor plan:

  Right of [first, second, etc.] offer: Suite ____, approximately ___ rentable square feet.

  Lease Term

  The initial lease term shall be _____. Tenant will have ___ (___) (___) year options to extend the lease. Tenant must notify Landlord in writing of its election to extend the lease no later than ___ (___) months prior to the expiration of the initial lease term.

  If Tenant exercises its Expansion Option with respect to the ___square foot expansion space, then it will be deemed to have exercised its option to extend the lease for the first ___ (__) year extension term.

  Cancellation Right

  Note: Again, not a standard proposal concession.

  Tenant will have a one-time cancellation right at the start of the ___ year of the lease term, with ___ months prior written notice. The fee for the exercise of the cancellation right will be the sum of the principal amount of the unamortized leasing costs, including tenant improvements, space planning, lease commissions (including lease commissions to XYZ Management Company) and an additional sum which shall represent the non-discounted difference between the average rent over the term of the lease and the rent actually paid during the first ___ years of the lease term. We will calculate the actual fee based on a straight-line depreciation at __ percent annual interest, and will note such fee in the lease. The cancellation fee will be paid upon notice of the exercise of the right to cancel. The cancellation right shall be null and void if Tenant is in default of any term or provision of the lease from the notice date through the ___ anniversary of the lease if Tenant relocates within a ten-mile radius of Main Street Office Center for reasons other than expansion, and assuming Main Street Office Center cannot offer Tenant expansion space.

  Occupancy

  The Premises can be made available for occupancy as early as [month/date/year].

  Base Rent

  The fully serviced rental rates per rentable square foot for the Premises, including both the Premises and any Expansion Premises then occupied, including a base amount for operating expenses and real estate taxes, shall be as follows:

  In no case will the rent be less than the rent for the immediately preceding period.

  Base Operating Expenses and Real Estate Taxes

  A base amount for operating expenses and real estate taxes is included in the rental rates indicated above. Tenant shall pay its pro rata share of all operating expenses and real estate taxes in excess of the ___ calendar Base Year, excluding nonrecurring expenses* (including its pro rata share of any increased real estate taxes resulting from the project’s sales or change in ownership during the lease term). Operating costs and real estate taxes for any year during which the average occupancy of the building is less than 100% shall be calculated based on the costs that would have been incurred if the building were 100% occupied.

  *Alternative language: Tenant shall pay the stipulated base amount of $__ per rentable square foot per year, excluding nonrecurring expenses.

  Storage Space

  There is currently approximately ___ square feet of storage space available in the basement of ______. This storage space is accessible directly from the building’s parking area via on-grade double doors or it can be accessible from the building’s elevators. The current rental rate for storage space is $___ per square foot per month.

  Tenant Improvements

  We will provide Tenant with an allowance of $___ per rentable square foot for tenant improvements for both the Premises and any Expansion Premises.

  Space Planning and Design

  We will pay for the space planning and design costs associated with the preparation of one space plan, one minor revision, and one set of working drawings, assuming a fully executed lease. Subject to our prior approval, if Tenant wishes to employ its own space planner/architect, we will reimburse up to $___ per square foot of their fees.

  Security Deposit

  A security deposit in the amount of one month’s rent shall be due upon lease execution.

  Parki
ng

  We will provide Tenant with free on-grade parking adjacent to Main Street Office Center in the amount of one parking space for every 300 square feet of rentable office space leased.

  Signage

  We will provide Tenant with the opportunity to have a monument type signage in a prominent location adjacent to ___. The cost of the sign will be the responsibility of Tenant, and the location and design will be subject to approval of the City of _____ and Landlord. Tenant, at its own cost, will also be entitled to standard building directory and suite signage.

  Security System

  Security for buildings in Main Street Office Center is achieved with a Schlage system of dead-bolt locks on all tenant suites. Tenants will be provided with keys that will allow them entry to the building and their tenant suites after building hours and on weekends. In addition, a private security company periodically patrols the Premises and checks building entries on nights and weekends.

  Building and HVAC Hours

  The building’s hours of operation are 8:00 a.m. to 6:00 p.m., Monday through Friday, excluding holidays. After-hours usage would be charged on an hourly basis. The current after-hours HVAC usage rate is $__ per hour.

  Brokerage Commissions

  Tenant represents and warrants that it has not been represented by a real estate broker who would be entitled to a commission in this Lease transaction (other than____). Landlord and Tenant shall hold each other harmless against the claims of any other broker or finder. [Landlord/Tenant] is responsible for paying the commission due ____.

  Existing Lease Obligations

  Landlord is unable to assume Tenant’s existing lease obligations.

  Contingency

  This proposal represents a preliminary outline of proposed business terms, and both parties understand and agree that no binding contract shall exist until Lease Agreement has been fully executed by Landlord and Tenant. This proposal is subject to prior lease of all or any portion of the Premises. This proposal shall also be contingent on review and approval of Tenant’s financials.

  We look forward to your careful consideration and response to our proposal. We are available at any time to meet with you to discuss this proposal. We genuinely desire to structure a long-term, mutually beneficial transaction with Tenant’s fine firm. If you have any questions, please call me at (###) ###-####. The terms of this proposal are valid for the next ___ days.

  Sincerely,

  [Name]

  Leasing Agent

  cc: [appropriate ccs]

  AGREED TO AND ACCEPTED BY:

  [Company name]

  By: ______________

  Name: _________________

  Title: ____________________

  A note on signature blocks: confirm that the signature block matches the entity for the financials you have reviewed and approved.

  Appendix D

  Proposal for an Existing Tenant

  When we enter into discussion with existing tenants for renewal (extension) or expansion, there’s an underlying lease already in place. Thus, any change to the terms becomes an amendment, usually a page or two long. The short form renewal proposal does not reiterate the amenities of the building because the tenant already knows them well. However, it’s still good to tell tenants that they are valued and that you look forward to continued strong relationships.

  The following sample language (and again, review your language with your attorney!) is intentionally brief in order to highlight business points.

  Date

  Prospective Tenant

  Company Name

  1234 Any Street

  City, State, Zip

  RE: Proposal to Lease Office Space

  123 Main Street

  Dear [tenant’s first name],

  [Landlord name] on behalf of [owner name] is pleased to present [tenant company name] with the following proposal to lease space at:

  Premises: Approximately 5,000 rentable square feet, located on the fourth floor of the building.

  Lease term/commencement: The lease term shall be five (5) years, commencing on January 1, 2012.

  Annual, Fully Serviced Base Rental Rate:

  Year 1: $___ per rentable square foot

  Years 2–5: $___ per rentable square foot

  Tenant Improvement Allowance: Landlord will contribute up to a maximum of ___ dollars ($X) per rentable square foot toward the cost of designing and constructing alterations within the Premises. Landlord’s general contractor will construct the alterations. Landlord shall pay for the cost of one (1) preliminary space plan and one (1) revision. Any additional planning and construction related costs shall be paid by the tenant.

  Operating Expenses/Real Estate Taxes: Tenant’s base year and tax year shall remain ____.

  Financials: Tenant shall provide Main Street Office Center with audited financial statements for the previous three (3) calendar years for Main Street Office Center’s review and approval.

  Security Deposit: The security deposit on hand shall be adequate to fulfill this requirement subject to review and approval of Tenant’s financial statements.

  Brokerage Commission: See prior proposal language. Alternate language: Landlord will offer a consultant fee of $___ per rentable square foot that Tenant may utilize to compensate its real estate consultant. However this consultant fee shall be amortized over the term of the lease at an interest rate of ___%.

  Contingency: This proposal represents a preliminary outline of proposed business terms, and both parties understand and agree that no binding contract shall exist until a lease agreement has been fully executed by [landlord name] and [tenant name]. This proposal shall not be considered a reservation of the Premises and is subject to prior leasing of all or any portion of the Premises.

  [Tenant’s first name], we look forward to finalizing this lease renewal with you. Please call me at your earliest convenience to discuss this proposal. Should you have any questions please call me at (XXX) XXX-XXXX.

  Very truly yours,

  [Name]

  Leasing Professional

  Accepted & Agreed

  Name _______________

  Title ________________

  Date ________________

  About the Author

  Annie Barnett Photography

  Alice Devine has over twenty-five years of commercial real estate experience. As a director of leasing for William Wilson & Associates (now EQ Office), Alice was responsible for leasing a multi-million square foot portfolio of Class A office space in the San Francisco Bay Area. She also created and taught a company-wide program focused on leasing and tenant retention. Earlier, at Norris, Beggs & Simpson, Alice was responsible for leasing and managing a medical and office portfolio.

  Alice holds a Bachelor of Arts in economics from the University of California, Berkeley and has earned the Real Property Administrator and Certified Property Manager designations from the Building Owners and Managers Institute and the Institute of Real Estate Management, respectively. She is a former board member and active volunteer at the non-profit Rebuilding Together, which renovates homes and community centers.

  www.devinerealestateguide.com

  Acknowledgments

  Many thanks to John Hamilton, principal of Embarcadero Capital Partners, for teaching me how to lease to and retain quality tenants, challenging me in the best of ways, and offering office space in which to work. To Jill Benitez, Jim Arce, Carol Castro, Veronica Scharton, Carol Knorp, and Kim Russell, who offered feedback and added their real estate expertise. To Dave Tuck, authors Bruce Henderson and Anne Janzer, Lynn Everett and Holly Brady for edits, publishing guidance, and good humor. To Jan Travis for the start. To Annie Barnett and Halkin Mason, photographers extraordinaire. Thank you also to the editors and designers at Girl Friday Productions including Alexander Rigby, Valerie Paquin, and Christina Henry de Tess
an for getting it right. And, of course, to the home team, for your support.

  In addition to individuals, several organizations served as valuable resources, including the Fisher Center for Real Estate and Urban Economics at U.C. Berkeley, Stanford’s Professionals in Real Estate, the Institute of Real Estate Management, and the Building Owners and Managers Association.

  Notes

  Chapter 1

  1.  Connie Bruck, "Rough Rider," The New Yorker, November 12, 2007, accessed November 30, 2018, https://www.newyorker.com/magazine/2007/11/12/rough-rider.

  2.  Henry A. Crumpton, “Training,” in The Art of Intelligence: Lessons from a Life in the CIA’s Clandestine Service (New York: Penguin Group, 2012), 32.

  3.  “Research Reports,” National Association of Realtors, accessed March 18, 2018, www.nar.realtor/research.

  4.  Richard J. Herring and Susan M. Wachter, Real Estate Booms and Banking Busts—An International Perspective, Group of Thirty, 1999, page 6, accessed March 28, 2017, http://www.group30.org.

 

‹ Prev