Sign Nevada Banking Lease Agreement Computer

Industry sign banking nevada lease agreement computer

hi guys ron rhody here and today we're going to be talking about commercial real estate leasing in particular what to look for on your next industrial lease in today's market it's december 2020 and this advice will be good carrying into 2021. now as an attorney my clients range from private equity funds holding a portfolio of industrial properties as well as the experienced single-family investor looking to step into commercial this video assumes a traditional warehouse space with storage and distribution as the primary use this won't cover some of the specialty manufacturing distribution or chemical storage warehouses in addition we're going to have minimal office space so about 15 percent of the total square footage if you have much more the rents start to get skewed as you pay a higher rent per foot for more office we're not going to look at complicating factors like 480 volt power cranes storage tanks or retail showrooms those are just additional complications that we're going to be outside the scope for today's video in addition we're going to look at local markets i do leasing all over texas in addition to nationwide but this video is really just going to talk about what's happening in dfw in texas and the broader movement towards industrial as an asset class in general finally we're going to talk about the risk and rewards of hiring an attorney what to ask as well as how to navigate the process and the negotiation if you do it yourself industrial leasing is one of the most popular asset classes right now this is the end of 2020 and that momentum is going to carry all the way into 2021. land suitable for industrial development is scarce they're building more supply than any other asset however even in this high demand market certain tenants will have more leverage than others and it's important to accurately assess your market position and design your lease and as well as the areas that you push back on to reflect your position as well as your investment goals that said properly structuring your lease as well as the exhibits and understanding your tenant's own goals will minimize conflicts and set you on a path which can produce a quickly signed win-win lease now let's talk about the commercial tenant as a goal if you're a landlord you want the tenant to number one pay rent number two you want them to pay their expenses these are your common area maintenance costs the way that you can get the tenant to pay as quickly as possible is to put it in the lease very clearly what expenses the tenant is responsible for now i've seen all range of different language from landlords trying to hedge trying to cover the best leases for the tenant's point of view when they want to pay is clear precision a line item of every expense and not leaving a catch-all or an ambiguously broad phrase to say to allow the landlord to maybe have more room to slide in a few other expenses so to that extent we may have caps on attorneys fees we may have a cap on property management as a pass-through this is the best way to avoid disputes between the tenant and the landlord when it comes to paying those common area maintenance expenses in addition as a landlord you want your tenant don't damage or contaminate the property with any hazardous chemicals so being clear and upfront about the tenant's use will prevent those types of misunderstandings where the tenant says i thought you knew i was going to do x in reality the landlord says no i didn't know you're going to do x and i didn't price my land accordingly price my lease accordingly finally the landlord is going to want rent increases we live in a world of ever increasing cost so the rent needs to have annual escalations and if it doesn't you need to understand how that model was underwritten from the landlord's point of view to have a flat rental rate for this type of property maybe it's a build to suit maybe it's a long long term lease something like that as far as the lease now there are many decisions that you have to make while you're drafting the lease and you're starting from the base boiler template lease you know that is i think one of the most important lessons for my clients is that the lease is really just a starting point no matter where you get your base lease you can get it from a prior deal you can get it from an attorney you can pull it off the internet i don't care it's just going to be a starting point because every industrial fleece looks nothing like the starting product there are lots of changes there are edits that you have to put in for your specific tenant for your specific landlord and this particular property and so the product that you end up with at the end is a reflection of that editing process and drafts and and strikethroughs that's a creative process with your attorney that is going to create an entirely different lease product than what you started with so business terms that's probably the most important high level everybody focuses on what's the price per square foot how many square feet is the building that can be verified but is there a process to challenge the square footage you know in multi-tenant buildings it is always a dispute of how much space are we actually getting and how do we measure that and do we have an opportunity to cure if later on down the road we think that it's not the square footage that we once thought it was finally legal terms these have to do with what constitutes notice what is sufficient for delivery what is a a breach you know default and what triggers different things when you have a late rent payment maybe the tenant has an excuse or do they have a right to offset these are all really critical questions that are important but you should understand whether you want the boilerplate form or you want to change it for this particular tenant because again every situation is different you may be able to extract more benefits from the other side by changing some legal terms without jeopardizing the entire lease finally we have lender the lender plays an important role in all of this process as the landlord you want to make sure that your lease complies with your loan agreement and there are lots of key provisions in those agreements that must be harmonious or you risk breaching your loan agreement and you may have other covenants and affirmative obligations for example an estoppel or an snda that is an example of a tri-party agreement that has to be agreed upon by everybody when you're wanting to refinance or finally repairs this is a lesser deal for maybe a single tenant building and there's very clear delineations but in multi-tenant it can be a very difficult problem for smaller tenants to challenge the necessity of large-scale park repairs passing those costs on whether they truly should be amortized as capital improvements or they get expensed and passed on to every tenant when you have a multi-tenant park or a building the benefits of challenging such an improvement get diminished if i only own 10 percent and i'm only paying 10 of the cost i may have less incentive to argue with the landlord that this expense was truly a capital expense that should be amortized and not passed through in cams again if you've diluted the tenant pool and reduced their incentive to challenge by 90 percent you may not find much resistance from your tenant pool at all so it's important to understand what could be properly classified and what is excluded from cam because there can be two or three pages of excluded expenses from cam finally you have rent disputes these can range from failure to provide failure to provide you know warranties or certifications of the building or a condition this would be a high level issue that may cause an excuse for the tenant not to pay rent and when you have these types of disputes you're going to look back at the lease and understand what is the dispute process finally breach you know that ties into rent but breach is really much broader than not paying rent and so what are the conditions that would trigger a breach that would not be a non-payment of rent and there's a whole host of different things and it's up to the landlord and tenant to decide how narrow or how broad the non-monetary breaches are finally i think it's important to touch on the market we've seen tremendous upheaval due to coven 19 in the commercial real estate market but industrial has proven to be a an incredibly resilient sector and i think all the money is pouring into this asset class due to the increase in online shopping now we're not just talking amazon we're not just talking walmart.com but every website and every retailer is increasing their warehousing and distribution footprint so that they can sell to their customers directly through their website and store product in a regional warehouse instead of going through some third party and instead of going through their normal retail channels and so with the pandemic you've seen a huge shift and even if some of that's dying off now we've seen what the resistance level was and for the first time more and more people who were previously not shopping online are now shopping online they've downloaded the app they've put their credit card in online google chrome has saved their credit card information that makes those consumers more likely to purchase in the future they may not do it now and they may not have liked everything but the next time they need something and it's available online it's going to be easier and that friction point is going to be reduced to encourage them to shop more online and that's what i believe we're going to be setting continuous new bars where if you have these events that cause more people to shop online it makes it easier for them to shop online the second time and that's why we're going to see a tremendous growth and we've seen a lot of money get into this warehouse but if there's any long-term play it's that industrial real estate it allows you to avoid losing money if another pandemic occurs you're not going to get affected by the shutdowns you're not getting affected by lockdown or government order and so there's some of that mitigation of risk for another pandemic versus retail office hotel hospitality and those sectors and also you can take advantage of the declines in office and retail no matter what the final impact of work from home or remote office has had i think most analysts everywhere agree that there is going to be some reduction it's definitely not going to be as low as it was now and you're only hearing about a couple of the big name companies doing 100 percent remote work from home but wherever that level settles at something less than covet at the peak of covid and something more than the status quo that delta is going to shift to other areas and it's going to shift to larger residential it's going to shift to higher priced homes as people want two offices and better amenities but it's also going to shift to online shopping it's going to shift to spending more time at home and wanting more of those amenities from commercial districts delivered to their home so you know that's my uh layperson's analysis on the commercial real estate market and let's go into the leasing process this is just going to be a simple 10-step outline first how do we get a lease started you know identify a property talk to your broker on the rent per square foot look at common area maintenance figure out what the return should be and what those numbers should be is this a single or multi-tenant building introduce your commercial broker to your lawyer get the business terms in aligned with the legal terms ask the broker for their opinion on market rates and your goals for the lease i think that one's more for your lawyer what are you really trying to achieve and what what's your deadline the best clients that i have tell me a deadline of run we would really like to get this lease signed by x date i can work backwards and know that i'm not going to spend a ton of time on minor issues if we need those days to really be negotiating major factors at the same time your lawyer is going to start drafting from that engagement he can start getting construction guidance if there's going to be significant tenant improvements is the landlord handling those is the tenant going to handle that is it subject to a guaranteed maximum price what are the bids looking like have you had your architect retained are they doing a use and space plan have you purchased the racks do you have any new shelving units that you need and again if you've gone this step you you probably have a letter of intent it may be good to put something in writing at this time that both parties agree these are our one to two pages of macro terms let's move forward and let's negotiate and once the lawyer has come created a draft he's run that by with your client now you can submit that to the other side and then you can have their lawyer review your base or neutral form finally you can go back and forth we'll have a couple of turns of that document and then you want to execute the lease you once you sign the lease you still want to look at what the rent commencement date is if you have a period of free rent while these improvements are being made you still need the lawyers oversight of the rental commencement date and you should have language in your lease that sets a rental commencement date even if the other side is non-responsive and you want to push a completion so that base rent is due cam is typically always being paid from the lease signing date complete the improvements do the inspections complete your punch list and have this brand new shell ready for your business and then you want the tenant to take possession congratulations you've signed your first industrial lease agreement thanks guys