Who’s Got My Money? e retail market and active tenants are continuing to change at a rapid pace. Landlords should also be adapting their expectations and negotiations to solidify the best tenant and not leave any “money on the table” during the deal process. With so many deals being franchised, purchases being done with development or financing contingencies, and an array of new concepts coming into play, what should you be looking for in a deal? We have brought in retail legal expert Jeremy Piccini, Esq., Founding Partner and Richard G. Lyons, Partner at Bertone Piccini LLP based out of Hasbrouck Heights, New Jersey to talk about common issues that arise when a contract is issued. Jeremy has been managing and negotiating office, industrial, land and retail related purchases and leases for over a decade and has facilitated hundreds of transactions in his career. Similarly, Rich has been managing and negotiating office, industrial, land and retail related purchases and leases throughout the country over the last six years, and handles roughly 13 million square feet worth of space a year. The Art of The Deal e Art all starts with your goal for the center. Oſten times this topic gets overlooked and eventually can prevent deals from being closed. Too much focus is placed on the asking rent or asking price on a sale while smaller line items can have a big effect on the bottom-line income depending on the owner’s plan. It is important to discuss this with your team prior to bringing your property to the market so they can secure the deal structure and tenant/ purchaser that will get the outcome you desire without wasting time. Next is identifying the value your center brings to the table. is is not to be confused with asking price. Yes, your center should be competitively priced. And yes, your broker should be setting your expectations accordingly so you can make a deal. But, what if your center brings a value that differs from other centers in the market? Oſten, these values are not obvious and many times overlooked. Most owners know if there is a secondary access road to their property. However, do they know how many cars are on that road and where that road goes to and comes from? Are there tenants on that DID YOU DO A BAD DEAL IN 2019? Mistakes commonly made by Landlords. JRI COMMERCIAL REAL ESTATE TRENDING HOT TOPICS Jeremy Piccini, Esq., Founding Partner Main: 201.483.9333 [email protected]Richard G. Lyons, Partner Main: 201.483.9333 [email protected]BERTONE I PICCINI ATTORNEYS AT LAW Jon Corbiscello, Retail/Investments Main: 973.420.9029 jcorbiscello@jefferyrealty.com William Farkas, Vice President Retail/Investments Main: 973.223.6600 bfarkas@jefferyrealty.com JAN 2020
Transcript
Who’s Got My Money?
The retail market and active tenants are continuing to change at a rapid pace. Landlords should also be adapting their expectations and negotiations to solidify the best tenant and not leave any “money on the table” during the deal process. With so many deals being franchised, purchases being done with development or financing contingencies, and an array of new concepts coming into play, what should you be looking for in a deal? We have brought in retail legal expert Jeremy Piccini, Esq., Founding Partner and Richard G. Lyons, Partner at Bertone Piccini LLP based out of Hasbrouck Heights, New Jersey to talk about common issues that arise when a contract is issued. Jeremy has been managing and negotiating office, industrial, land and retail related purchases and leases for over a decade and has facilitated hundreds of transactions in his career. Similarly, Rich has been managing and negotiating office, industrial, land and retail related purchases and leases throughout the country over the last six years, and handles roughly 13 million square feet worth of space a year.
The Art of The Deal
The Art all starts with your goal for the center. Often times this topic gets overlooked and eventually can prevent deals from being closed. Too much focus is placed on the asking rent or asking price on a sale while smaller line items can have a big effect on the bottom-line income depending on the owner’s plan. It is important to discuss this with your team prior to bringing your property to the market so they can secure the deal structure and tenant/ purchaser that will get the outcome you desire without wasting time.Next is identifying the value your center brings to the table. This is not to be confused with asking price. Yes, your center should be competitively priced. And yes, your broker should be setting your expectations accordingly so you can make a deal. But, what if your center brings a value that differs from other centers in the market? Often, these values are not obvious and many times overlooked. Most owners know if there is a secondary access road to their property. However, do they know how many cars are on that road and where that road goes to and comes from? Are there tenants on that
DID YOU DO A BAD DEAL IN 2019? Mistakes commonly made by Landlords.
JRI COMMERCIAL REAL ESTATE
TRENDING HOT TOPICS
Jeremy Piccini, Esq., Founding PartnerMain: 201.483.9333 [email protected]
road that help or hurt their center? What is the distance to the nearest highway interchange and where are the people on that highway going? All of these are just a few examples of points that could make a deal or warrant a higher asking rent or asking purchase price. For leases, we need to make sure this type of use/ tenant is the right synergy for your shopping center. In today’s market of boutique fitness and food related tenants, small-shop users are putting more emphasis on co-tenancy. Owners have to go beyond just what exclusions are in place from other tenants, and put themselves in the shoes of the customer. Customers are looking for an experience and they want it to be convenient. Many retailers have preferences on where they want to be and who they want, or do not want to be with in a shopping center. This is separate from what an exclusion may prevent. These preferences are most often communicated to the broker, but do not always make it to the Landlord. This does not present a problem at first as a deal may be signed, but when there are multiple vacancies within a center, it can play a part in leasing the other vacant unit(s). At Jeffery Realty Inc. we educate our owners on the potential success of new tenants. We understand that every Landlord may not be in tune with the latest criteria for active retailers, so we provide that information. A few topics we review are:• Does this tenant benefit the center? • Can this tenant be successful in our center? • What is the likelihood that this use will still be in
business in 10 years? • Who do we potentially lose in our other vacant spaces
if we accept this tenant?• Who do we potentially attract to the other vacant
spaces if we accept this tenant?Nothing in Life is Guaranteed
Once we make the decision to review an offer, it is time to make sure we have included some key elements. As many deals are now franchised, the number one focus a Landlord should have is the Guaranty. This is one item that often is left to the lease or the later part of the LOI after rent and terms have been discussed. But, how can you prevent wasting time with a Tenant that may not have any comfort to offer you if troubles arise? At a minimum, the Landlord should receive a non-verified form of Personal Financial Statement which is provided by the broker to understand the financial status of the Tenant. Landlords are finding themselves taking more risk than they are
accustomed to in today’s environment. The first step is mitigating this as much as possible. The same applies to purchases. Make sure you understand how the buyer will be paying for the acquisition. If it is an unknown buyer, a proof of funds should be submitted to the Seller no later than the execution of the Offer.Politics and Approvals?
It may seem enticing to receive a higher asking price, but when tied to lengthy development times, this can be risky. Owners have to make sure they understand any and all developmental approvals and contingencies. Town ordinances, political figures, and interest rates all play a very vital role in the timeline it takes for a deal to get
from approvals to the finish line. It is important to understand who the elected officials are in town, and
how long they have been in office. A changing of the guard can lead to a change in policies that
can affect your wallet. Sellers need to be aware of any DOT approvals that may override
town and zoning approval. We see this many times when a developer plans to add a residential
component to the site. A “Trip Report” by a qualified engineering firm should always be done when this is a
factor. Make sure to break down the difference in the numbers between selling “as-is” as opposed to doing so with an offer containing approvals. Take your eye off the overall number and focus on the difference. Often times, after taxes, the contingency period for a higher number, becomes less appealing.Money Money Money
This section applies more to leasing. It is imperative to review all aspects of the offer that have a dollar sign attached to it. The rent is always the main focus. Some Landlords may overlook the importance of amortizing the free rent and Tenant Improvement Allowance over the term of the lease. Landlords often view these items as a give away to the tenant when in fact, they should be viewed as a loan. If you are offering money in a Tenant Improvement Allowance, you should receive compensation over the course of the lease term. Make sure to review your calculations with your broker to ensure you are not in violation of any Federal Banking regulations. Don’t make the mistake of leaving money on the table by overlooking free rent and Tenant Improvement Allowance.When it comes to a purchase, make sure you negotiate to have carrying costs covered by the potential buyer especially on a deal with contingencies. Every month you cover the carrying costs, you are taking away from your bottom line sale price. The Legal Team
I would like to now introduce Jeremy Piccini, Esq., Founding Partner and Richard G. Lyons, Esq. Partner at
Bertone Piccini LLP, to explain mistakes they commonly see during the deal process from deal points and terms being omitted in the LOI/ Offer down to final items and expectations with the lease/contract.“There are 3 golden starting points in our opinion when considering a retail lease or purchase,” says Jeremy. “First, you have to hire the right professionals, in this case, that starts with the right retail real estate broker with experience in that market. The right broker should help guide the process of locating your ideal retail lease space (for tenants) or the right tenant (for landlords) and will help negotiate the lease terms with their industry insight as to what is standard, with market changes in mind. Some landlords we see are more concerned with ½ of a percentage point discount as opposed to the finding the right professionals, which is like stepping over a dollar to get a penny. Finally, the right broker will also have all the right documents in place before taking the next step as they would have requested and reviewed the square footage of the space(s) involved, the proposed plans, the franchise demands, the financial requirements and statements, and other details of the deal.” “Second, spend the time negotiating a thorough term sheet/letter of intent before moving to contract, without any surprises jumping in during the lease or purchase document negotiation that “kills the deal”. For example, provide clarity that a personal guaranty will be required from a new franchise tenant should the financials and security deposit not be historical or robust enough. However, in my experience, working with brokers like Jon Corbiscello and Bill Farkas ofJeffrey Realty Inc., they often mitigate that risk for two reasons: (1) they have already had that discussion and considered that term in the letter of intent, and (2) if it is not covered, their knowledge of the market and demands and standard terms help to coach both landlords or tenants into a deal that is mutually beneficial yet risk averse.”
“Third and finally, start the process early, as the moving parts of a retail deal (lending, franchise approval, zoning, improvements) often take quite some time. If the tenant at your center is up for renewal in six (6) months, it is too late to then fill that space upon their departure should they fail to renew. Instead, have a plan in place for your brokers to periodically have meetings and discussions with you and/ or the tenants to understand the future of the center to avoid any surprises.”“Once you hit the three golden starting points, and you are in the midst of your term sheet negotiation, a few smaller notes to keep in mind:• Square Footage – Be clear as to the expectation between
landlord and tenant how much space (exactly) is required or offered.
• Commencement – This point is most disputed as soon as the lease is signed if the parties have failed to provide clarity – does the term commence upon signing? Upon town approval of a certificate of occupancy? Upon granting of permits? Upon completion of Landlord’s Work? Or a fixed date? Be clear to avoid controversy.
• Franchise Addendum – If the retail space is for a franchised location, be upfront with having both parties understand that there may be specific requirements of the Franchisor in order for the Franchisee to lease the space, including assignment rights, default notice rights, rights to cure, and otherwise.”
We want you to make 2020 your best year selling and leasing at your properties.. Jeffery Realty and Bertone Piccini LLP are available for free strategy sessions and consultations. Before you consider marketing your property or if you are struggling with selling or leasing your building, give us a call to evaluate the best way to move forward and get you to the finish line.
By Jon Corbiscello, William Farkas, Jeremy Piccini, Richard G. Lyons
JRI is a 25-year-old successful commercial real estate brokerage firm, specializing in the selling and leasing of retail properties in Central and Northern New Jersey.
Since our inception, we have consummated and co-brokered more than 3,000 retail transactions. We have remained steadfast, and continue to focus and concentrate only on leasing retail spaces and selling shopping centers in New Jersey.
One of our founding principles is to provide the best service to our customers, putting their goals and objectives first. From truly representing our owners and developers by providing the most
specific and accurate information about their site, finding the best prospective tenants, and ultimately setting them up for the highest occupancy and returns possible. We look to develop long-term working relationships by helping our owners and developers to find the right deals.
Additionally, at any given time we are marketing over 200+ shopping centers in New Jersey, as such we have strong relationships with many of the prespective landlords our tenants will likely be making deals with. We also represent numerous national, regional and franchises in their search for locations.
116 ROUTE 22 N. PLAINFIELD, NJ 07060 I T: 908-668-9600 I F: 908-668-5225 I WWW.JEFFERYREALTY.COM
ABOUT JEFFERTY REALTY
road that help or hurt their center? What is the distance to the nearest highway interchange and where are the people on that highway going? All of these are just a few examples of points that could make a deal or warrant a higher asking rent or asking purchase price. For leases, we need to make sure this type of use/ tenant is the right synergy for your shopping center. In today’s market of boutique fitness and food related tenants, small-shop users are putting more emphasis on co-tenancy. Owners have to go beyond just what exclusions are in place from other tenants, and put themselves in the shoes of the customer. Customers are looking for an experience and they want it to be convenient. Many retailers have preferences on where they want to be and who they want, or do not want to be with in a shopping center. This is separate from what an exclusion may prevent. These preferences are most often communicated to the broker, but do not always make it to the Landlord. This does not present a problem at first as a deal may be signed, but when there are multiple vacancies within a center, it can play a part in leasing the other vacant unit(s). At Jeffery Realty Inc. we educate our owners on the potential success of new tenants. We understand that every Landlord may not be in tune with the latest criteria for active retailers, so we provide that information. A few topics we review are:• Does this tenant benefit the center? • Can this tenant be successful in our center? • What is the likelihood that this use will still be in
business in 10 years? • Who do we potentially lose in our other vacant spaces
if we accept this tenant?• Who do we potentially attract to the other vacant
spaces if we accept this tenant?Nothing in Life is Guaranteed
Once we make the decision to review an offer, it is time to make sure we have included some key elements. As many deals are now franchised, the number one focus a Landlord should have is the Guaranty. This is one item that often is left to the lease or the later part of the LOI after rent and terms have been discussed. But, how can you prevent wasting time with a Tenant that may not have any comfort to offer you if troubles arise? At a minimum, the Landlord should receive a non-verified form of Personal Financial Statement which is provided by the broker to understand the financial status of the Tenant. Landlords are finding themselves taking more risk than they are
accustomed to in today’s environment. The first step is mitigating this as much as possible. The same applies to purchases. Make sure you understand how the buyer will be paying for the acquisition. If it is an unknown buyer, a proof of funds should be submitted to the Seller no later than the execution of the Offer.Politics and Approvals?
It may seem enticing to receive a higher asking price, but when tied to lengthy development times, this can be risky. Owners have to make sure they understand any and all developmental approvals and contingencies. Town ordinances, political figures, and interest rates all play a very vital role in the timeline it takes for a deal to get
from approvals to the finish line. It is important to understand who the elected officials are in town, and
how long they have been in office. A changing of the guard can lead to a change in policies that
can affect your wallet. Sellers need to be aware of any DOT approvals that may override
town and zoning approval. We see this many times when a developer plans to add a residential
component to the site. A “Trip Report” by a qualified engineering firm should always be done when this is a
factor. Make sure to break down the difference in the numbers between selling “as-is” as opposed to doing so with an offer containing approvals. Take your eye off the overall number and focus on the difference. Often times, after taxes, the contingency period for a higher number, becomes less appealing.Money Money Money
This section applies more to leasing. It is imperative to review all aspects of the offer that have a dollar sign attached to it. The rent is always the main focus. Some Landlords may overlook the importance of amortizing the free rent and Tenant Improvement Allowance over the term of the lease. Landlords often view these items as a give away to the tenant when in fact, they should be viewed as a loan. If you are offering money in a Tenant Improvement Allowance, you should receive compensation over the course of the lease term. Make sure to review your calculations with your broker to ensure you are not in violation of any Federal Banking regulations. Don’t make the mistake of leaving money on the table by overlooking free rent and Tenant Improvement Allowance.When it comes to a purchase, make sure you negotiate to have carrying costs covered by the potential buyer especially on a deal with contingencies. Every month you cover the carrying costs, you are taking away from your bottom line sale price. The Legal Team
I would like to now introduce Jeremy Piccini, Esq., Founding Partner and Richard G. Lyons, Esq. Partner at
Bertone Piccini LLP, to explain mistakes they commonly see during the deal process from deal points and terms being omitted in the LOI/ Offer down to final items and expectations with the lease/contract.“There are 3 golden starting points in our opinion when considering a retail lease or purchase,” says Jeremy. “First, you have to hire the right professionals, in this case, that starts with the right retail real estate broker with experience in that market. The right broker should help guide the process of locating your ideal retail lease space (for tenants) or the right tenant (for landlords) and will help negotiate the lease terms with their industry insight as to what is standard, with market changes in mind. Some landlords we see are more concerned with ½ of a percentage point discount as opposed to the finding the right professionals, which is like stepping over a dollar to get a penny. Finally, the right broker will also have all the right documents in place before taking the next step as they would have requested and reviewed the square footage of the space(s) involved, the proposed plans, the franchise demands, the financial requirements and statements, and other details of the deal.” “Second, spend the time negotiating a thorough term sheet/letter of intent before moving to contract, without any surprises jumping in during the lease or purchase document negotiation that “kills the deal”. For example, provide clarity that a personal guaranty will be required from a new franchise tenant should the financials and security deposit not be historical or robust enough. However, in my experience, working with brokers like Jon Corbiscello and Bill Farkas ofJeffrey Realty Inc., they often mitigate that risk for two reasons: (1) they have already had that discussion and considered that term in the letter of intent, and (2) if it is not covered, their knowledge of the market and demands and standard terms help to coach both landlords or tenants into a deal that is mutually beneficial yet risk averse.”
“Third and finally, start the process early, as the moving parts of a retail deal (lending, franchise approval, zoning, improvements) often take quite some time. If the tenant at your center is up for renewal in six (6) months, it is too late to then fill that space upon their departure should they fail to renew. Instead, have a plan in place for your brokers to periodically have meetings and discussions with you and/ or the tenants to understand the future of the center to avoid any surprises.”“Once you hit the three golden starting points, and you are in the midst of your term sheet negotiation, a few smaller notes to keep in mind:• Square Footage – Be clear as to the expectation between
landlord and tenant how much space (exactly) is required or offered.
• Commencement – This point is most disputed as soon as the lease is signed if the parties have failed to provide clarity – does the term commence upon signing? Upon town approval of a certificate of occupancy? Upon granting of permits? Upon completion of Landlord’s Work? Or a fixed date? Be clear to avoid controversy.
• Franchise Addendum – If the retail space is for a franchised location, be upfront with having both parties understand that there may be specific requirements of the Franchisor in order for the Franchisee to lease the space, including assignment rights, default notice rights, rights to cure, and otherwise.”
We want you to make 2020 your best year selling and leasing at your properties.. Jeffery Realty and Bertone Piccini LLP are available for free strategy sessions and consultations. Before you consider marketing your property or if you are struggling with selling or leasing your building, give us a call to evaluate the best way to move forward and get you to the finish line.
By Jon Corbiscello, William Farkas, Jeremy Piccini, Richard G. Lyons
JRI is a 25-year-old successful commercial real estate brokerage firm, specializing in the selling and leasing of retail properties in Central and Northern New Jersey.
Since our inception, we have consummated and co-brokered more than 3,000 retail transactions. We have remained steadfast, and continue to focus and concentrate only on leasing retail spaces and selling shopping centers in New Jersey.
One of our founding principles is to provide the best service to our customers, putting their goals and objectives first. From truly representing our owners and developers by providing the most
specific and accurate information about their site, finding the best prospective tenants, and ultimately setting them up for the highest occupancy and returns possible. We look to develop long-term working relationships by helping our owners and developers to find the right deals.
Additionally, at any given time we are marketing over 200+ shopping centers in New Jersey, as such we have strong relationships with many of the prespective landlords our tenants will likely be making deals with. We also represent numerous national, regional and franchises in their search for locations.
116 ROUTE 22 N. PLAINFIELD, NJ 07060 I T: 908-668-9600 I F: 908-668-5225 I WWW.JEFFERYREALTY.COM
ABOUT JEFFERTY REALTY
Who’s Got My Money?
The retail market and active tenants are continuing to change at a rapid pace. Landlords should also be adapting their expectations and negotiations to solidify the best tenant and not leave any “money on the table” during the deal process. With so many deals being franchised, purchases being done with development or financing contingencies, and an array of new concepts coming into play, what should you be looking for in a deal? We have brought in retail legal expert Jeremy Piccini, Esq., Founding Partner and Richard G. Lyons, Partner at Bertone Piccini LLP based out of Hasbrouck Heights, New Jersey to talk about common issues that arise when a contract is issued. Jeremy has been managing and negotiating office, industrial, land and retail related purchases and leases for over a decade and has facilitated hundreds of transactions in his career. Similarly, Rich has been managing and negotiating office, industrial, land and retail related purchases and leases throughout the country over the last six years, and handles roughly 13 million square feet worth of space a year.
The Art of The Deal
The Art all starts with your goal for the center. Often times this topic gets overlooked and eventually can prevent deals from being closed. Too much focus is placed on the asking rent or asking price on a sale while smaller line items can have a big effect on the bottom-line income depending on the owner’s plan. It is important to discuss this with your team prior to bringing your property to the market so they can secure the deal structure and tenant/ purchaser that will get the outcome you desire without wasting time.Next is identifying the value your center brings to the table. This is not to be confused with asking price. Yes, your center should be competitively priced. And yes, your broker should be setting your expectations accordingly so you can make a deal. But, what if your center brings a value that differs from other centers in the market? Often, these values are not obvious and many times overlooked. Most owners know if there is a secondary access road to their property. However, do they know how many cars are on that road and where that road goes to and comes from? Are there tenants on that
DID YOU DO A BAD DEAL IN 2019? Mistakes commonly made by Landlords.
JRI COMMERCIAL REAL ESTATE
TRENDING HOT TOPICS
Jeremy Piccini, Esq., Founding PartnerMain: 201.483.9333 [email protected]
