These hazy days of summer are anything but quiet in our corner of the real estate market. As we work on retail, office and industrial leases across the country, we’ve recently navigated treacherous terrain in the Red Zone (that point when the leases are just about, but not quite, ready for signature) that I’d like to share with you.
Red Zone Zingers
Our Black Box strategies to prevent these potential deal killers from killing the deal (hyper vigilance, communication and teamwork) have saved the day time after time. Although it’s impossible to prepare in advance for any particular Red Zone zinger, you can be prepared.
Mobilized and On Message
In one recent Red Zone situation, we represented a real estate investment trust, owner of shopping centers throughout the eastern United States, on a lease with a publicly-owned tenant. Throughout the negotiation, the tenant insisted that the landlord take responsibility for how provisions governing the use of existing tenants might be interpreted in years to come. The landlord consistently declined, but agreed to attach the actual provisions for the other tenants as an exhibit to the lease, so there could be no confusion about the actual language.
We made sure all open issues were resolved well before the end of the calendar quarter during which the lease had to be signed, including this one, or so we thought. The day before the quarterly deadline, the tenant’s attorney overruled the business rep who had agreed to drop this point. Everyone on the landlord team mobilized, was in communication and on message. At the 11th hour, literally, the tenant did an about-face, gave up on this final point and signed the lease. The moral of the story: sometimes you have to stand your ground and keep pushing to get the lease over the finish line.
Communication and Teamwork
In a current Red Zone situation, The Sinreich Group represents a prominent real estate owner on a complicated entertainment lease. As the lease moved into the Red Zone, the landlord’s key business person left the company, and the tenant suddenly insisted that a newly formed entity with no net worth, rather than the credit-worthy entity whose financials the landlord had approved, would sign the lease. A different prospective tenant made an offer to lease the premises, leaving the landlord no choice but to simultaneously pursue it.
Once again, we put our Red Zone strategies to work: working closely with the landlord’s new business person, negotiations proceeded; a limited guaranty to shore up the shell tenant was agreed to; and after disclosing that there was another interested tenant, simultaneous lease negotiations are moving forward. With two active leases in the Red Zone for the same premises, may the best tenant prevail!