In the Spotlight: Getting a Lease Signed in 20 Days

In today's uncertain economy, time can be the worst enemy for a landlord trying to get a lease signed.

What can a landlord do to get that critical lease signed as soon as possible so that a competing landlord or global event does not cause this prospective tenant to reconsider? Today, more than ever, landlords need to manage critical lease transactions, if not all lease transactions, in the same way they manage capital markets transactions. If a landlord applies principles utilized in capital market transactions, a lease should be “closed” in under 20 days.

Do Not Spend Too Much Time on a Letter of Intent, Get a Lease Draft Out

If the parties and their brokers have exchanged more than two drafts of letters of intent or term sheet without reaching full agreement on all matters, the landlord should consider having a lease prepared by its counsel and distributed. So long as the initial space and term are agreed to, as well as base rent and escalations, why exchange more drafts and endure more conference calls on a letter of intent? That time and energy should be focused on the lease itself.

Review Your '2005 Lease Form'

Often, a lease draft is prepared by counsel from the landlord's standard form without much thought or input from the landlord. In today's competitive marketplace, the landlord must focus on the initial lease draft. The landlord must not only be sure that the agreed-to terms are accurately reflected, but it must also give consideration to more “balanced” lease provisions that are reflective of a renters' market.

This approach should short-circuit the “heavy mark-up” that tenant's counsel typically provides. Simple concessions in the first draft that would be, and in the past have been, agreed to in a final comparable lease will cut days ' and perhaps weeks ' off the negotiation process without adversely affecting the ability of the landlord to finance or sell the building.

Since the current downturn in the commercial real estate market may be with us for a while, it may be a good time to revisit your standard lease form and consider how many of those tough provisions that you inserted earlier this decade are really necessary.

The Capital Markets Transaction Approach

The 'Kick-Off' Call

Now, the capital markets approach. Landlords should initiate a “kick-off” call with all parties on the day that the initial draft is distributed. The landlord or its counsel should take the lead on the “kick-off' call and maintain an upbeat and positive tone. The landlord should use terminology utilized in capital market transactions ' talk about “closing,” a checklist, etc. The “closing date” should be set by the landlord in this call no more than 20 days thereafter. It will be difficult for anyone on the call to object to the notion of getting the deal done as soon as possible.

The 'Closing' Schedule

The landlord can then ask the tenant, its broker and counsel when written comments to the initial lease draft can be expected. That date should typically be in five to seven days. Anything longer should be challenged on the call. The landlord should then establish a closing schedule for negotiations based on that input.

The landlord should have its counsel review the initial lease comments with tenant's counsel in an effort to eliminate as many points of disagreement as possible. Thereafter, there should be no significant lawyer negotiations without the principals involved. Also, where possible, the landlord needs to be flexible and concede on matters in order to keep the momentum in a negotiation

Use a Closing Checklist

In advance of the “kick-off” call, the landlord, its broker and counsel should create a closing checklist. No landlord could imagine closing an acquisition and/or financing transaction without a checklist. Initially, the closing checklist can remind the parties that a letter of credit, insurance certificate and the like are needed. The landlord should also have its counsel update the closing checklist to list all unresolved lease comments. The checklist should be sufficiently detailed so that the parties do not necessarily have to refer back to the lease during discussions.

The checklist is an indispensible visual aid. It focuses the parties on three pages, and not the lengthy lease document. Using a checklist allows the parties to monitor the progress of negotiations as items are checked off.

In the end, a landlord needs to create the same sense of urgency in closing a lease deal as pervades a $100 million acquisition closing. The landlord's team must press their counterparty on the tenant's team in a coordinated way, keeping the focus on closing, which means resolving open issues and disagreements every day.

Anthony Casareale is Of Counsel in the Real Estate Practice of Greenberg Traurig, LLP's White Plains, NY, and Miami offices.

In today's uncertain economy, time can be the worst enemy for a landlord trying to get a lease signed.

What can a landlord do to get that critical lease signed as soon as possible so that a competing landlord or global event does not cause this prospective tenant to reconsider? Today, more than ever, landlords need to manage critical lease transactions, if not all lease transactions, in the same way they manage capital markets transactions. If a landlord applies principles utilized in capital market transactions, a lease should be “closed” in under 20 days.

Do Not Spend Too Much Time on a Letter of Intent, Get a Lease Draft Out

If the parties and their brokers have exchanged more than two drafts of letters of intent or term sheet without reaching full agreement on all matters, the landlord should consider having a lease prepared by its counsel and distributed. So long as the initial space and term are agreed to, as well as base rent and escalations, why exchange more drafts and endure more conference calls on a letter of intent? That time and energy should be focused on the lease itself.

Review Your '2005 Lease Form'

Often, a lease draft is prepared by counsel from the landlord's standard form without much thought or input from the landlord. In today's competitive marketplace, the landlord must focus on the initial lease draft. The landlord must not only be sure that the agreed-to terms are accurately reflected, but it must also give consideration to more “balanced” lease provisions that are reflective of a renters' market.

This approach should short-circuit the “heavy mark-up” that tenant's counsel typically provides. Simple concessions in the first draft that would be, and in the past have been, agreed to in a final comparable lease will cut days ' and perhaps weeks ' off the negotiation process without adversely affecting the ability of the landlord to finance or sell the building.

Since the current downturn in the commercial real estate market may be with us for a while, it may be a good time to revisit your standard lease form and consider how many of those tough provisions that you inserted earlier this decade are really necessary.

The Capital Markets Transaction Approach

The 'Kick-Off' Call

Now, the capital markets approach. Landlords should initiate a “kick-off” call with all parties on the day that the initial draft is distributed. The landlord or its counsel should take the lead on the “kick-off' call and maintain an upbeat and positive tone. The landlord should use terminology utilized in capital market transactions ' talk about “closing,” a checklist, etc. The “closing date” should be set by the landlord in this call no more than 20 days thereafter. It will be difficult for anyone on the call to object to the notion of getting the deal done as soon as possible.

The 'Closing' Schedule

The landlord can then ask the tenant, its broker and counsel when written comments to the initial lease draft can be expected. That date should typically be in five to seven days. Anything longer should be challenged on the call. The landlord should then establish a closing schedule for negotiations based on that input.

The landlord should have its counsel review the initial lease comments with tenant's counsel in an effort to eliminate as many points of disagreement as possible. Thereafter, there should be no significant lawyer negotiations without the principals involved. Also, where possible, the landlord needs to be flexible and concede on matters in order to keep the momentum in a negotiation

Use a Closing Checklist

In advance of the “kick-off” call, the landlord, its broker and counsel should create a closing checklist. No landlord could imagine closing an acquisition and/or financing transaction without a checklist. Initially, the closing checklist can remind the parties that a letter of credit, insurance certificate and the like are needed. The landlord should also have its counsel update the closing checklist to list all unresolved lease comments. The checklist should be sufficiently detailed so that the parties do not necessarily have to refer back to the lease during discussions.

The checklist is an indispensible visual aid. It focuses the parties on three pages, and not the lengthy lease document. Using a checklist allows the parties to monitor the progress of negotiations as items are checked off.

In the end, a landlord needs to create the same sense of urgency in closing a lease deal as pervades a $100 million acquisition closing. The landlord's team must press their counterparty on the tenant's team in a coordinated way, keeping the focus on closing, which means resolving open issues and disagreements every day.

Anthony Casareale is Of Counsel in the Real Estate Practice of Greenberg Traurig, LLP's White Plains, NY, and Miami offices.