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Previewing a lease helps prevent headaches

BY CSA STAFF

“Who agreed to this language?”

How many times have each of us been handed leases containing terms which cause us to ask , “Where did these provisions come from?” or “This is the first time I’ve seen these stipulations, did the transactions group understand the costs of compliance?” The answer is: probably more times than we’d like to recall.

What are the results of not reviewing lease terms prior to execution? Certainly, a lot of headaches and difficulties result; but these headaches can come with pretty hefty price tags. In many instances, these problems can be dealt with at the “front end” during lease negotiations.

Our industry has a current process whereby lease administration typically receives leases only after the agreements have been executed. Some lease administrators advocate a new lease process – a proactive process – that has the potential to identify unfavorable lease clauses while, at the same time, allowing for inclusion of best-in-class lease language to be added prior to the lease being executed.

Following are the goals of a proactive review process:

1. Eliminate negative surprises which tenants may have not budgeted in a given lease year;

2. Provide clear definitions so there are no vague or gray areas in the lease which many times bring disputes into legal, costing more money.

How does this new process work? A proactive model encourages reviewing lease language by the lease administration department prior to the lease signing event. The first step in this process is to submit a letter of intent to review. Reviewing a lease just prior to the document signing is too late. As soon as the initial draft of the lease is prepared, submit a letter of intent to review.

Prior to the lease review, develop a checklist of best practice language and communicate it to the appropriate parties. You may also think about customizing the items to review depending on the retailer and the type of lease being reviewed. It is always a smart practice to adhere to GAAP: Reconciliations should be reimbursements to the landlord, not profit.

Benefits of migrating to proactive lease language review process:
However, if this language has not been discussed and agreed to prior to executing a lease, it’s going to be very difficult to challenge should problems arise. The benefits of migrating toward my suggested model of lease administration review most certainly outweigh the costs. The most important item you can do in order to get buy-in is to provide the internal and external transaction group with an understanding of the value of this process. Second, educate the deal makers that lease language directly affects the costs to the tenant over the lease term. Next, obtain a high level of support in the organization for the change management.

You may also want to break down the language into deal points and costs associated with “less than acceptable” language so that the transactions group can make informed decisions. Finally, developing a tracking tool to quantify the value the lease administration department is bringing to the negotiating table on a lease-by-lease basis is something you certainly want to consider.

In summary, migrating toward a proactive review of lease language by the lease administration group will drive cost savings throughout the portfolio. I recommend developing a tracking mechanism to document the value offered by your group in this endeavor. Although calculating the precise savings may not always be measurable, tracking and documenting the language changes will demonstrate the increased value provided by the lease administration department.

Al Stabile is managing director, Strategic Portfolio Solutions Group, Studley, and a member of the National Retail Tenants Association (NRTA). He can be reached at [email protected].


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E.Ka says:
Mar-17-2013 11:22 am

That is really true. Renters or buyers would really have a headache if they don't have the preview of it. - Aldo Todini

E.Ka says:
Mar-17-2013 11:22 am

That is really true. Renters or buyers would really have a headache if they don't have the preview of it. - Aldo Todini

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Lowe’s, Habitat for Humanity celebrate Hispanic Heritage Month

BY CSA STAFF

DALLAS — Habitat for Humanity and Lowe’s are joining together to celebrate National Hispanic Heritage Month with two large construction projects that will bring together Lowe’s Heroes, community organizations, schools and local VIPS to celebrate Hispanic heritage while building strong foundations for the future in partnership with Dallas and Houston families. The project includes building two new homes and completing critical repairs on three existing homes in partnership with low-income families.

Lowe’s, a national partner of Habitat since 2004, is providing $200,000 to support the projects. Building in partnership with Dallas-Area Habitat for Humanity, Lowe’s will join a single father of two constructing his new home alongside volunteers from Trinity River Mission, the West Dallas Chamber of Commerce, Voice of Hope and St. Mary of Carmel Catholic School. In Houston, Lowe’s will partner with a single mother of four building her home in partnership with Houston Habitat for Humanity, the Houston Hispanic Chamber of Commerce, Lakewood Church and SER Jobs for Progress. Construction begins on Sept. 8 in Dallas and Sept. 24 in Houston, with both houses scheduled for completion by the holidays.

Lowe’s Heroes employee volunteers and participating community partners will also work throughout Hispanic Heritage Month to make repairs to two homes in Dallas and one in Houston, working side by side with the current homeowners.

“It is central to Habitat’s mission to engage people of all races, religions and nationalities in our work to create affordable housing,” said Mark Andrews, VP volunteer and institutional engagement, Habitat for Humanity International. “Habitat thrives on the diversity of its partners and volunteers who bring so many varied experiences and backgrounds to bear on behalf of low-income families. We’re grateful for the opportunity Lowe’s has created to foster that kind of collaborative spirit in Houston and Dallas.”

The initiative is part of Lowe’s current five-year commitment to Habitat, which includes grant programs, project funding, how-to clinics and underwriting Habitat’s Women Build program. The company’s commitment to Habitat through 2013 totals more than $40 million.

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Payless ‘falls’ for value with new shoe line

BY CSA STAFF

TOPEKA, Kan. — Payless ShoeSource has unveiled its fall Incredible Value Everyday Collection — a refreshed line with a range of footwear for women, men and children including dress, casuals and athletic styles at prices starting at $10 for kids, $15 for women, and $20 for men.

Key styles for women include career pumps featuring kitten, mid- and high-heels with exotic, nude patent and classic black uppers, colorful canvas sneakers, athletic styles, as well a range of flats in seasonally right colors such as cobalt blue, rich red and metallics along with popular handbag silhouettes. For girls, the line offers classic Mary Jane and saddle shoe styles, athletics and slip-on flats adorned with bow and ruffle treatments and featuring uppers in a range of colors such as purple, red and metallic silver with glitter finishing treatments. For men and boys, the Incredible Value assortment includes versatile lace-up and slip-on oxfords, dress styles, athletic and skate-inspired styles.

The "Incredible Value" collection is an ongoing program with evergreen products that continue to be offered season after season with refresh styles added throughout the year.

"Our new Incredible Value Everyday line boasts a wide range of styles for the family featuring everything from wardrobe essentials for women and moms like career pumps and casual flats, to closet staples for kids for school, play and special occasions, as well as styles for men," said LuAnn Via, CEO of Payless. "These prices are incredible — everyday — and that means shoppers don’t need to wait for a sale to grab a great buy."

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