Rice University researchers working out of the planned Collaborative Research Center will get a $3 million jump-start with a seed grant from the John S. Dunn Research Foundation.
The Houston-based foundation awarded the funding to Rice University for the purpose of initiating collaborative research studies in biomedical science that have the potential for clinical applications.
One condition of the grant requires researchers to collaborate with scientists or physicians from other Texas Medical Center member institutions, which relates to the original mission of the center.
In announcing plans for the CRC in 2004, Rice officials made clear that their main goal was to facilitate joint research between Rice’s experts in biological sciences, engineering, computation, and the physical and mathematical sciences and Texas Medical Center physicians and scientists (see “Research hub unites Rice, TMC,” Nov. 5, 2004).
Charles Hall, president of the John S. Dunn Research Foundation, says his group’s top agenda has always been medical research.
“We get frustrated sometimes by not knowing who to give to for breast cancer research,” notes Hall, who also works as a tax attorney for Fulbright & Jaworski LLP.
“We’re very interested in getting a bang for our buck through collaborative work,” he says.
The late John Dunn Sr. established the Dunn Research Foundation in 1977 to support organizations and programs engaged in biomedical, educational and research programs, primarily in the greater Houston area. The foundation has awarded $1.5 million in various grants to Rice.
Richard E. Wainerdi, CEO of the Texas Medical Center, said in a written statement via e-mail that the TMC looks “forward to the development of some outstanding partnerships due to the foundation’s generosity.”
BRINGING RESEARCH OUT OF SILOS
Rice’s Collaborative Research Center is now slated to open in the summer of 2009, according to Kathleen Matthews, the Dean of Rice’s Weiss School of Natural Sciences.
The 10-story, 500,000-square-foot facility is currently under construction on the corner of University Boulevard and Main Street.
The first round of seed grants will be limited to cross-institutional teams of researchers within the CRC who have not previously worked together, and whose work shows potential for clinical use in the near future.
Matthews says the Dunn Foundation is helping Rice’s efforts by “bringing people together to do things that wouldn’t have happened if we stayed in our little silos.”
In terms of CRC occupants, the university’s entire department of bioengineering will be moving there once the building is ready, according to Matthews.
“They have been, from the very beginning of this idea, up front and very enthusiastic about being a part of this,” she says.
Also, some faculty from the university’s biochemistry and cell biology department will call the CRC home.
Rice is currently in ongoing discussions with other institutions, but Matthews could not say if any agreements had yet been finalized.
Initially, the CRC will hold seven to 10 labs per floor on eight of the 10 floors.
The grant from the Dunn Foundation, notes Matthews, will “catalyze new interactions by putting some resources out there for people who haven’t collaborated previously.”
Adds Matthews: “This gives them the resources to gather data, test an idea that they come up with together and take that to the next level.”For more information see www.Houstonrealtyadvisors.com or www.houstonrealtyadvisors.net
Monday, October 20, 2008
HCSS TO BUILD NEW 42,000-SQUARE-FOOT HEADQUARTERS
SUGAR LAND, TEXAS — Construction software company Heavy Construction System Specialists has announced plans to relocate its corporate offices from Houston to Sugar Land. The firm will construct a 42,000-square-foot facility on an 11.92-acre site at the corner of Alston Road and West Airport Boulevard. The building will house corporate offices, as well as the company’s software research and development operations. The construction team and timetable were not released. For more information: see www.houstonrealtyadvisors.com or www.houstonrealtyadvisors.et
Friday, October 17, 2008
ENERGY CENTER I RECEIVES LEED-SILVER
Dallas-based Trammell Crow Co. and Des Moines, Iowa-based Principal Real Estate Investors have received LEED-Silver certification from the U.S. Green Building Council for Energy Center I, a 332,000-square-foot office building located adjacent to Interstate 10 and Dairy Ashford in Houston. Completed in January 2008, the project is the largest speculative office building in Houston to receive LEED certification, as well as the first office building in Houston’s Energy Corridor to receive the designation. Sustainable features include high-efficiency chillers; a non-chemical, pulsed-power water treatment system; a CO2-based demand controlled ventilation system; the use of low-emitting adhesives and sealants; low-flow faucets and fixtures; a drip irrigation system; and the use of recycled and locally sourced construction materials during the build. Energy Center I is fully occupied by Foster Wheeler USA, which uses the building as its corporate headquarters. Construction is also advancing for Energy Center II, the second phase of the project. The project has been pre-certified to the LEED-Silver level, and is scheduled for completion in December. For more information see: www.houstonrealtyadvisors.com or www.houstonrealtyadvisors.net or www.edayres.com
Thursday, October 16, 2008
Possession is 99% of the LANDLORDS!
While tenants need some certainty, landlords need flexibility to deal with construction timetables, governmental approvals, permitting, weather delays and other variables. Both landlords and tenants have legitimate interests to protect in addressing delivery of possession.
A tenant incurs significant costs and expenses in preparing to accept delivery. Tenants order and schedule the delivery of materials for construction of leasehold improvements, goods and merchandise; commit key personnel for the build-out and store opening; hire employees in contemplation of construction and store operations, and place advertising many months before the grand opening. Failure of the landlord to meet its delivery obligations results in numerous costs and operational ramifications to the tenant. All of these issues compel a prudent tenant to protect itself by adequately addressing delivery of possession and remedies in the event of a landlord breach of its obligations with respect to delivery.
Most tenants would prefer either:
(i) immediate occupancy upon full execution of the
lease, or
(ii) a fixed delivery date that is agreed upon at lease
execution, with the landlord obligated to perform certain specified improvements to the leased premises consistent with plans and specifications approved by the parties.
The more likely scenario, though, is for there to be no fixed delivery date at lease execution. Additionally, while the parties may agree generally on the work to be performed by each party, frequently there are no detailed plans and specifications for either the landlord's work or the tenant's work at lease execution. However, all of these issues need to be adequately addressed in the lease.
Creating a delivery window
The parties should be able to agree on a delivery window, obligating the landlord to deliver the leased premises to the tenant with the landlord's work substantially completed. This window is frequently a period of several months, and if the leased premises are not yet constructed, may be one, two or more years from lease execution. A landlord should be obligated to give the tenant notice by a certain date, typically several months prior to the first day of the delivery window, advising the tenant of the status of the landlord's construction and the estimated date that the landlord will deliver the leased premises to the tenant with the landlord's work substantially complete. This estimated delivery date must fall within the delivery window specified by the parties in the lease.
If agreed to by the parties, the landlord could have the right to revise the estimated delivery date prior to a date certain, by which time the landlord shall give the tenant a firm delivery date upon which the landlord's work shall be substantially completed and the leased premises delivered to the tenant. Upon establishing this final delivery date, the landlord should have no further right to modify the delivery date.
Neither the estimated nor final delivery date should be earlier than
(i) 30 days after the date the tenant receives the
estimated delivery date or the final delivery date from the landlord, as applicable, or
(ii) the first day of the delivery window, as agreed to in
the lease.
Nor should the estimated or final delivery date be later than the last day of the delivery window, as established in the lease.
If the landlord fails to provide notice of the final delivery date on or before the earlier of the final delivery date and 30 days prior to the previously established estimated delivery date, or if the final delivery date established by the landlord does not otherwise comply with the requirements of the lease (e.g., the final delivery date falls outside of the agreed-upon delivery window), the estimated delivery date should be deemed to be the final delivery date. Additionally, if the landlord fails to provide an estimated delivery date on or before the date the estimated delivery date is to be established, or if such date does not comply with the requirements of the lease, then the estimated delivery date should automatically be deemed to be the first or the last day of the delivery window, as established by the parties in the lease.
Tenant remedies for late delivery
In the event the landlord's work is not substantially completed and the leased premises are not delivered to the tenant on or before the final delivery date, the tenant should be entitled to specific remedies on account thereof. Most landlords want to quantify their exposure for late delivery and failure to substantially complete the landlord's work. Typically, the tenant receives a credit against its rental obligations for each day after the final delivery date until delivery of the leased premises is made to the tenant consistent with the terms of the lease, including substantial completion of the landlord's work.
Many tenants ask for a credit against base rent equal to one (1) day of base rent for each day of delay; others can negotiate two (2) days'
credit for each day of delay. Some credits relate to all rent, and some only relate to base rent. A tenant is wise to provide that time is of the essence regarding all the delivery dates discussed above.
A landlord's provision that the landlord shall have no liability for failure to deliver or for late delivery is rarely appropriate.
Deferring delivery or lease termination
In many instances, a rent credit is an insufficient remedy for the tenant. Many tenants only open their stores during certain times of the year. To address the blackout periods, a tenant should have the right, if the delivery has not occurred by a date certain with the landlord's work substantially complete, to defer delivery until a specified date. Some tenants may insist on the right to terminate the lease if the landlord fails to meet its delivery obligations. Most frequently, the tenant will obtain the deferral right, but not the termination right, unless the landlord fails to deliver the leased premises to the tenant with the landlord's work substantially completed by the deferred delivery date. A landlord should provide that the rent credit would abate during this deferred delivery period in the event the tenant exercises such deferred delivery right. In addition, if the tenant exercises a termination right on account of the landlord's inability to deliver the leased premises by a certain date, the tenant should try to obtain a reimbursement obligation from the landlord for the tenant's out-of-pocket costs incurred in negotiating the lease and preparing to occupy the demised premises. If the landlord agrees to same, the landlord usually will cap its exposure to a tenant for these costs.
Force majeure
Most of the foregoing dates and remedies should be subject to force majeure. However, a prudent tenant will insist that there be some outside date by which the tenant has the right to terminate the lease, regardless of whether the landlord failed to meet such date on account of force majeure or otherwise. While the landlord's damages may be tolled by force majeure, at some point a tenant should have a termination right, regardless of force majeure. A landlord should be obligated to give notice to the tenant in the event of a force majeure event. A strong tenant will insist that the landlord's failure to notify the tenant of a force majeure event within a specific number of days after the force majeure event will nullify the landlord's right to claim a delay on account of force majeure.
Landlord and tenant work obligations
Delivery without the landlord's approval of plans and specifications for the tenant's work should be unacceptable to a tenant. If a tenant cannot commence its work, it does not want delivery of possession. While many leases describe generally the work to be performed by the parties, the lease should provide for the parties to agree upon plans and specifications for both parties' work obligations. Within a certain number of days after lease execution, each party should be obligated to deliver to the other plans and specifications for their proposed work. Each party should have an affirmative obligation to provide comments thereto within a specified number of days after receipt thereof, with specific comments and proposed modifications thereto. Typically each party should be obligated to revise its proposed plans to reflect the reasonable objections and proposed modifications of the other party within a specified time thereafter.
This process of reviewing and submitting should continue until the plans and specifications have been approved by both parties. Failure to respond within the specified time frame should be deemed approval by the party failing to respond to the plans as last submitted. The lease should further provide for the landlord to obtain all necessary building occupancy permits necessary to perform the landlord's work, and the lease should address who is obligated to obtain the necessary permits and approvals for the tenant to perform its work and open the leased premises for business to the public. The lease should also state the landlord's obligations with respect to completion of common area improvements, including parking areas, curb cuts, lighting and landscaping. Certain common areas should be identified on the site plan of the center, which areas must be completed in order for the tenant to open and operate for business in the leased premises.
Many tenants do not want the delivery date to be deemed to have occurred until the tenant has been able to obtain all necessary permits to perform tenant's work. This is a negotiable item, depending on the strength of the parties and the scope of the work to be performed by each party.
Joint walk throughs
The parties should provide in the lease that they shall conduct a joint walk-through of the leased premises approximately 2 to 3 weeks prior to the final delivery date to ascertain the status of the landlord's construction and to identify items that need to be performed prior to delivery.
Completion of construction
The lease should identify what items the landlord must complete and provide to the tenant prior to delivery of possession and/or prior to the tenant's opening for business, such as occupancy permits, governmental approvals, certificates of completion by the landlord's architect, copies of contractor, subcontractor and supplier warranties, operation and maintenance manuals, the landlord's record drawings for construction of the leased premises, utility contact information, utility meter information, a subcontractor list with contact information, etc. All of these items are negotiable and the landlord may or may not be willing to provide them, depending on the tenant's negotiating strength.
Many things need to happen in a timely manner for a tenant to obtain possession at the time contemplated by the parties upon lease execution.
Landlords and tenants should not leave these issues to chance. Properly addressing delivery windows, dates, updates and revisions to the timing and the work obligations of the parties well in advance of delivery can greatly facilitate a smooth and timely delivery of possession of the leased premises to the tenant with the landlord's work substantially complete. A prudent tenant will protect itself and guard against delays and the consequences thereof, while providing some reasonable flexibility to the landlord to address the realities of construction and permitting requirements, many of which are beyond the landlord's reasonable control. By addressing these issues in the lease, both parties can protect themselves and facilitate a good start to their lease relationship prior to delivery and well in advance of the rent commencement date." For more information see: www.houstonrealtyadvisors.com or www.houstonrealtyadvisors.net
A tenant incurs significant costs and expenses in preparing to accept delivery. Tenants order and schedule the delivery of materials for construction of leasehold improvements, goods and merchandise; commit key personnel for the build-out and store opening; hire employees in contemplation of construction and store operations, and place advertising many months before the grand opening. Failure of the landlord to meet its delivery obligations results in numerous costs and operational ramifications to the tenant. All of these issues compel a prudent tenant to protect itself by adequately addressing delivery of possession and remedies in the event of a landlord breach of its obligations with respect to delivery.
Most tenants would prefer either:
(i) immediate occupancy upon full execution of the
lease, or
(ii) a fixed delivery date that is agreed upon at lease
execution, with the landlord obligated to perform certain specified improvements to the leased premises consistent with plans and specifications approved by the parties.
The more likely scenario, though, is for there to be no fixed delivery date at lease execution. Additionally, while the parties may agree generally on the work to be performed by each party, frequently there are no detailed plans and specifications for either the landlord's work or the tenant's work at lease execution. However, all of these issues need to be adequately addressed in the lease.
Creating a delivery window
The parties should be able to agree on a delivery window, obligating the landlord to deliver the leased premises to the tenant with the landlord's work substantially completed. This window is frequently a period of several months, and if the leased premises are not yet constructed, may be one, two or more years from lease execution. A landlord should be obligated to give the tenant notice by a certain date, typically several months prior to the first day of the delivery window, advising the tenant of the status of the landlord's construction and the estimated date that the landlord will deliver the leased premises to the tenant with the landlord's work substantially complete. This estimated delivery date must fall within the delivery window specified by the parties in the lease.
If agreed to by the parties, the landlord could have the right to revise the estimated delivery date prior to a date certain, by which time the landlord shall give the tenant a firm delivery date upon which the landlord's work shall be substantially completed and the leased premises delivered to the tenant. Upon establishing this final delivery date, the landlord should have no further right to modify the delivery date.
Neither the estimated nor final delivery date should be earlier than
(i) 30 days after the date the tenant receives the
estimated delivery date or the final delivery date from the landlord, as applicable, or
(ii) the first day of the delivery window, as agreed to in
the lease.
Nor should the estimated or final delivery date be later than the last day of the delivery window, as established in the lease.
If the landlord fails to provide notice of the final delivery date on or before the earlier of the final delivery date and 30 days prior to the previously established estimated delivery date, or if the final delivery date established by the landlord does not otherwise comply with the requirements of the lease (e.g., the final delivery date falls outside of the agreed-upon delivery window), the estimated delivery date should be deemed to be the final delivery date. Additionally, if the landlord fails to provide an estimated delivery date on or before the date the estimated delivery date is to be established, or if such date does not comply with the requirements of the lease, then the estimated delivery date should automatically be deemed to be the first or the last day of the delivery window, as established by the parties in the lease.
Tenant remedies for late delivery
In the event the landlord's work is not substantially completed and the leased premises are not delivered to the tenant on or before the final delivery date, the tenant should be entitled to specific remedies on account thereof. Most landlords want to quantify their exposure for late delivery and failure to substantially complete the landlord's work. Typically, the tenant receives a credit against its rental obligations for each day after the final delivery date until delivery of the leased premises is made to the tenant consistent with the terms of the lease, including substantial completion of the landlord's work.
Many tenants ask for a credit against base rent equal to one (1) day of base rent for each day of delay; others can negotiate two (2) days'
credit for each day of delay. Some credits relate to all rent, and some only relate to base rent. A tenant is wise to provide that time is of the essence regarding all the delivery dates discussed above.
A landlord's provision that the landlord shall have no liability for failure to deliver or for late delivery is rarely appropriate.
Deferring delivery or lease termination
In many instances, a rent credit is an insufficient remedy for the tenant. Many tenants only open their stores during certain times of the year. To address the blackout periods, a tenant should have the right, if the delivery has not occurred by a date certain with the landlord's work substantially complete, to defer delivery until a specified date. Some tenants may insist on the right to terminate the lease if the landlord fails to meet its delivery obligations. Most frequently, the tenant will obtain the deferral right, but not the termination right, unless the landlord fails to deliver the leased premises to the tenant with the landlord's work substantially completed by the deferred delivery date. A landlord should provide that the rent credit would abate during this deferred delivery period in the event the tenant exercises such deferred delivery right. In addition, if the tenant exercises a termination right on account of the landlord's inability to deliver the leased premises by a certain date, the tenant should try to obtain a reimbursement obligation from the landlord for the tenant's out-of-pocket costs incurred in negotiating the lease and preparing to occupy the demised premises. If the landlord agrees to same, the landlord usually will cap its exposure to a tenant for these costs.
Force majeure
Most of the foregoing dates and remedies should be subject to force majeure. However, a prudent tenant will insist that there be some outside date by which the tenant has the right to terminate the lease, regardless of whether the landlord failed to meet such date on account of force majeure or otherwise. While the landlord's damages may be tolled by force majeure, at some point a tenant should have a termination right, regardless of force majeure. A landlord should be obligated to give notice to the tenant in the event of a force majeure event. A strong tenant will insist that the landlord's failure to notify the tenant of a force majeure event within a specific number of days after the force majeure event will nullify the landlord's right to claim a delay on account of force majeure.
Landlord and tenant work obligations
Delivery without the landlord's approval of plans and specifications for the tenant's work should be unacceptable to a tenant. If a tenant cannot commence its work, it does not want delivery of possession. While many leases describe generally the work to be performed by the parties, the lease should provide for the parties to agree upon plans and specifications for both parties' work obligations. Within a certain number of days after lease execution, each party should be obligated to deliver to the other plans and specifications for their proposed work. Each party should have an affirmative obligation to provide comments thereto within a specified number of days after receipt thereof, with specific comments and proposed modifications thereto. Typically each party should be obligated to revise its proposed plans to reflect the reasonable objections and proposed modifications of the other party within a specified time thereafter.
This process of reviewing and submitting should continue until the plans and specifications have been approved by both parties. Failure to respond within the specified time frame should be deemed approval by the party failing to respond to the plans as last submitted. The lease should further provide for the landlord to obtain all necessary building occupancy permits necessary to perform the landlord's work, and the lease should address who is obligated to obtain the necessary permits and approvals for the tenant to perform its work and open the leased premises for business to the public. The lease should also state the landlord's obligations with respect to completion of common area improvements, including parking areas, curb cuts, lighting and landscaping. Certain common areas should be identified on the site plan of the center, which areas must be completed in order for the tenant to open and operate for business in the leased premises.
Many tenants do not want the delivery date to be deemed to have occurred until the tenant has been able to obtain all necessary permits to perform tenant's work. This is a negotiable item, depending on the strength of the parties and the scope of the work to be performed by each party.
Joint walk throughs
The parties should provide in the lease that they shall conduct a joint walk-through of the leased premises approximately 2 to 3 weeks prior to the final delivery date to ascertain the status of the landlord's construction and to identify items that need to be performed prior to delivery.
Completion of construction
The lease should identify what items the landlord must complete and provide to the tenant prior to delivery of possession and/or prior to the tenant's opening for business, such as occupancy permits, governmental approvals, certificates of completion by the landlord's architect, copies of contractor, subcontractor and supplier warranties, operation and maintenance manuals, the landlord's record drawings for construction of the leased premises, utility contact information, utility meter information, a subcontractor list with contact information, etc. All of these items are negotiable and the landlord may or may not be willing to provide them, depending on the tenant's negotiating strength.
Many things need to happen in a timely manner for a tenant to obtain possession at the time contemplated by the parties upon lease execution.
Landlords and tenants should not leave these issues to chance. Properly addressing delivery windows, dates, updates and revisions to the timing and the work obligations of the parties well in advance of delivery can greatly facilitate a smooth and timely delivery of possession of the leased premises to the tenant with the landlord's work substantially complete. A prudent tenant will protect itself and guard against delays and the consequences thereof, while providing some reasonable flexibility to the landlord to address the realities of construction and permitting requirements, many of which are beyond the landlord's reasonable control. By addressing these issues in the lease, both parties can protect themselves and facilitate a good start to their lease relationship prior to delivery and well in advance of the rent commencement date." For more information see: www.houstonrealtyadvisors.com or www.houstonrealtyadvisors.net
Wednesday, October 15, 2008
Escalation issues
1. Well-designed office key to improving employee performance
Workplace design has a very real impact on companies' bottom lines.
"Businesses are embracing performance-focused workplace design as a strategic business initiative – as the forum that can drive employee excellence, business objectives, and ultimately, the bottom line.
In practice, many businesses seem to ascribe a low value to workplace design. Businesses that ignore the design and layout of their workplace are failing to optimize the full value of their human capital.
46% of workers surveyed do not believe creating a productive workplace is a priority at their companies, and 40% say that minimizing costs is the main reason behind their workplace's current layout. 20% rated their physical workplace environment as being only fair to poor.
The survey, conducted by Gensler, also demonstrates a link between the physical office and work processes such as innovation, collaboration and creativity. Two-thirds of workers believe they are more efficient when they work closely with co-workers. However, about 30% of workers don't think that their current workspace promotes spontaneous interaction, collaboration, or cooperation and teamwork among colleagues and direct reports. Only 50% believe that their current workplace design encourages innovation and creativity.
Topping the list of employee grievances about physical environment were:
a. Lack of space;
b. Too few quiet areas;
c. Uncomfortable workstations; and
d. Bad layout and design
Other results from the study include:
· Over 1/3 of respondents say their current workplace does
not promote health and well being;
· 62% of U.S. office workers have great respect for leaders
who work in an open plan environment with teams rather than in private offices.
· Only 42% of respondents say they would be proud to show
important customers or potential recruits their current workplaces."
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2. Escalation issues
Except for very short-term leases, almost every commercial lease executed today contains a rent escalation clause.
from Probate & Property, July/August 2006
"The trend is for landlords to create a lease in which the tenant pays a fixed return to the landlord plus reimbursement of many capital and expense items, such as taxes, insurance, maintenance, and operations. In effect, this trend applies the concept of the net lease - which formerly applied only to the leases of a freestanding structure to a single tenant- to all commercial leases.
Rent Escalation Methods
Landlords and tenants might structure a rent escalation clause in several ways.
These methods include increasing the rent by
• A fixed amount each year,
• The percentage increase in either the consumer price index (CPI)
or another inflationary index, or
• The actual increase in the landlord's operating,
maintenance, and insurance expenses and real estate taxes.
Some standard leases use a combination of 2 or more of these methods.
The most common escalation clause passes through to the tenant any increase in operating expenses and real estate tax. Landlords choose this technique for good reason. Because it is the most frequently used escalation provision, most tenants will accept it, and, of the available escalation methods, it is the most accurate reflection of a landlord's increased operating costs, because its computation should create an increase exactly equal to those costs. Yet it is the most complex of the 3 escalators.
Some leases have the tenants pay a percentage share of the total operating expenses for the operating year, but the more typical clause requires payment by each tenant of its percentage share of the increase in costs for the operating year over a base amount. When the increase is over a base amount, setting that base is crucial to the tenant.
Problems with Definitions- Property
The most significant definitional problem with operating expenses for the tenant relates to the definition of the landlord's property to which the pass-through charges apply. Normally, the landlord's property should be defined as the office, warehouse, or shopping center building or complex of buildings, any adjoining parking garage that serves the building, the real estate on which these improvements are situated, and private streets and easements, all of which are owned by the landlord. In some instances, though, the adjoining private streets or easements accessing the building are jointly owned or shared with third parties. In those circumstances, street and easement expenses should be shared proportionately with the third party.
The tenant should receive a breakdown of the real estate - that is, property descriptions, rates, and value - as of the commencement date of the lease. The tenant should determine whether the building is assessed at its full value or at a lesser sum in the event that the building is not fully completed or fully occupied. If the building is not completed, and therefore is assessed at less than its full value, the tenant will be subject to an escalation, even though the tax rate did not change, simply because the building was not fully assessed. The concept also holds true for an adjoining parking garage. Also, if any improvements are added to the building or parking garage after the commencement date of the lease or if any adjacent property is acquired, taxes on those items should be disclosed.
Taxes
A final area of concern is the tenant's liability for taxes. For example, if the landlord contests taxes and obtains a reduction or a refund, the tenant should share the benefit as a future credit or, if the term is at its end, receive a refund instead. Some states permit a tenant to contest property taxes.
With some minor exceptions, assessments payable in installments should be determined on an accrual basis. Each taxing authority has its own timetable for the payment of real estate ad valorem taxes. The taxes may be determined on a fiscal or calendar year basis and may be payable quarterly, semiannually, or annually with a penalty for late payment.
The tax reimbursement clause should dovetail with this actual timetable."
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3. Landlord's consent to sublease
Whether a landlord's refusal to consent to a sublease to a bank was unreasonable when tenant was a grocery store and landlord had reserved a spot in the shopping center.
from Recent Developments and Trends in Shopping Center Law, 2008 U.S.
Shopping Center Law Conference
"Carr-Gottstein Foods Co. (Tenant) leased space in a shopping center to be used as a grocery store from Norville (Landlord). The lease provided that Tenant must obtain Landlord's written approval prior to subletting and that Landlord must not unreasonably withhold such consent.
Tenant requested Landlord consent to a sublease to a bank.
Landlord withheld consent by demanding 75% of the bank's rent.
Tenant sued Landlord, alleging that Landlord's withholding of consent was unreasonable and in violation of the lease. Tenant argued that Landlord could not withhold consent to a sublease to a bank because under the lease, Tenant was permitted to operate a bank in its store.
Landlord consented that banking was a permitted use under the lease.
The trial court granted summary judgment for Tenant.
Norville v. Carr-Gottstein Foods Co., 84 P.3d 996 (Alaska 2004)
Holding:
Reversed. The Supreme Court of Alaska held that material issues of fact remained as to whether Landlord's withholding of consent to the sublease was unreasonable. Tenant's argument that under the lease Landlord must consent to any sublease that was for a use that would be permitted the Tenant's Use Clause if conducted by Tenant was incorrect as a matter of law. Reasonableness was the only limitation specified regarding the right of the Landlord to withhold consent.
Furthermore, Landlord's proffered reasons for withholding consent – a bank would interfere with Landlord's plan to lease space in the shopping center to another bank, and gross sales, and therefore percentage rents, would be impaired – are legitimate reasonable not impermissible under the lease's terms.
Whether Landlord's reasons for withholding consent were genuine and reasonable under the circumstances were questions of fact to be determined by the tried of fact.
The court also ruled that material issues of fact remained as to whether Tenant's lease permitted general branch banking."
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4. Breathing new life into former big box properties
Flexibility and patience are key to re-tenanting vacant big box facilities.
from Shopping Center Business, November 2008
"Many of the big boxes, including pet stores, discount retailers, electronics and sporting goods retailers of the 1990s have disappeared, often dragging the rest of the shopping center down with them. But when these facilities close, they leave behind opportunities for profit in an interesting real estate market niche: the acquisition and leasing of vacant or partially leased former big box retail locations.
These opportunities are often overlooked by larger developers and owners. It takes a certain kind of investor with specific skills, resources and patience to take advantage of these value-added opportunities successfully.
Big box properties for sale nationwide
No single driver fuels the recent trend of big box properties closing their doors. Mergers and bankruptcies play a key role. In some areas, demographics and market dynamics change, prompting retailers to seek new locations. Retail stores may follow the pull away from historic business core areas to more promising locations. Some retailers may decide to leave a regional market altogether.
Transforming undervalued properties into profit centers
A key advantage of these properties is that existing buildings, with full entitlements, can be acquired at a much lower cost than it takes to build a new facility in today's market.
The greatest challenge is to determine what to do with the building.
The successful buyer must be willing to buy quickly without having to identify a replacement tenant before closing. Further complicating the process is problematic acquisition financing – conventional underwriting standards will usually frown on a vacant big box with its negative cash flow.
With the capability to hold on to and carry a vacant or partly leased property for as long as 18 to 24 months, a buyer can seek potential users and try to anticipate the ways in which the market will develop.
Finding the right use for a former big box store
The first prospects to look at are the retailers who are similar to the former tenants. After that, flexibility is the key.
A typical challenge of big boxes: their extreme depth. Because the majority of retailers do not want depth of 350 to 400 feet (not atypical), owners may simply wall off the back part of the building, tear it down, or find alternative uses for it, such as storage.
Community issues figure in big box property re-use
Vacant big box properties can become problematic for a community. Their visibility can create a perception that the area is not a good retail market. The absence of retail tenants interrupts sales tax revenues.
Facilities can also become eyesores, inviting vandalism and trash dumping.
Some communities can impose complicated or unrealistic requirements on buyers and redevelopers, who must match the desires of the local communities with what is most practical and the best solution for an old location.
Success and profitability in a range of different markets
Many of these vacant big box transactions are one-off deals, too small to interest larger investment companies who have no appetite for risk.
As a nimble, niche operator in smaller markets, with the ability to close transactions fast, a specialist firm can acquire distressed, vacant and even stigmatized properties from different sellers and revitalize them successfully in different ways. To find the best opportunities, the buyer must be looking for properties in several different secondary and tertiary markets that show promise. The important ingredient is the understanding that patience will be required for success in all of these types of acquisitions. That is where the opportunities lie."
For more information see http://www.houstonrealtyadvisors.com/ or http://www.houstonrealtyadvisors.net/
Workplace design has a very real impact on companies' bottom lines.
"Businesses are embracing performance-focused workplace design as a strategic business initiative – as the forum that can drive employee excellence, business objectives, and ultimately, the bottom line.
In practice, many businesses seem to ascribe a low value to workplace design. Businesses that ignore the design and layout of their workplace are failing to optimize the full value of their human capital.
46% of workers surveyed do not believe creating a productive workplace is a priority at their companies, and 40% say that minimizing costs is the main reason behind their workplace's current layout. 20% rated their physical workplace environment as being only fair to poor.
The survey, conducted by Gensler, also demonstrates a link between the physical office and work processes such as innovation, collaboration and creativity. Two-thirds of workers believe they are more efficient when they work closely with co-workers. However, about 30% of workers don't think that their current workspace promotes spontaneous interaction, collaboration, or cooperation and teamwork among colleagues and direct reports. Only 50% believe that their current workplace design encourages innovation and creativity.
Topping the list of employee grievances about physical environment were:
a. Lack of space;
b. Too few quiet areas;
c. Uncomfortable workstations; and
d. Bad layout and design
Other results from the study include:
· Over 1/3 of respondents say their current workplace does
not promote health and well being;
· 62% of U.S. office workers have great respect for leaders
who work in an open plan environment with teams rather than in private offices.
· Only 42% of respondents say they would be proud to show
important customers or potential recruits their current workplaces."
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2. Escalation issues
Except for very short-term leases, almost every commercial lease executed today contains a rent escalation clause.
from Probate & Property, July/August 2006
"The trend is for landlords to create a lease in which the tenant pays a fixed return to the landlord plus reimbursement of many capital and expense items, such as taxes, insurance, maintenance, and operations. In effect, this trend applies the concept of the net lease - which formerly applied only to the leases of a freestanding structure to a single tenant- to all commercial leases.
Rent Escalation Methods
Landlords and tenants might structure a rent escalation clause in several ways.
These methods include increasing the rent by
• A fixed amount each year,
• The percentage increase in either the consumer price index (CPI)
or another inflationary index, or
• The actual increase in the landlord's operating,
maintenance, and insurance expenses and real estate taxes.
Some standard leases use a combination of 2 or more of these methods.
The most common escalation clause passes through to the tenant any increase in operating expenses and real estate tax. Landlords choose this technique for good reason. Because it is the most frequently used escalation provision, most tenants will accept it, and, of the available escalation methods, it is the most accurate reflection of a landlord's increased operating costs, because its computation should create an increase exactly equal to those costs. Yet it is the most complex of the 3 escalators.
Some leases have the tenants pay a percentage share of the total operating expenses for the operating year, but the more typical clause requires payment by each tenant of its percentage share of the increase in costs for the operating year over a base amount. When the increase is over a base amount, setting that base is crucial to the tenant.
Problems with Definitions- Property
The most significant definitional problem with operating expenses for the tenant relates to the definition of the landlord's property to which the pass-through charges apply. Normally, the landlord's property should be defined as the office, warehouse, or shopping center building or complex of buildings, any adjoining parking garage that serves the building, the real estate on which these improvements are situated, and private streets and easements, all of which are owned by the landlord. In some instances, though, the adjoining private streets or easements accessing the building are jointly owned or shared with third parties. In those circumstances, street and easement expenses should be shared proportionately with the third party.
The tenant should receive a breakdown of the real estate - that is, property descriptions, rates, and value - as of the commencement date of the lease. The tenant should determine whether the building is assessed at its full value or at a lesser sum in the event that the building is not fully completed or fully occupied. If the building is not completed, and therefore is assessed at less than its full value, the tenant will be subject to an escalation, even though the tax rate did not change, simply because the building was not fully assessed. The concept also holds true for an adjoining parking garage. Also, if any improvements are added to the building or parking garage after the commencement date of the lease or if any adjacent property is acquired, taxes on those items should be disclosed.
Taxes
A final area of concern is the tenant's liability for taxes. For example, if the landlord contests taxes and obtains a reduction or a refund, the tenant should share the benefit as a future credit or, if the term is at its end, receive a refund instead. Some states permit a tenant to contest property taxes.
With some minor exceptions, assessments payable in installments should be determined on an accrual basis. Each taxing authority has its own timetable for the payment of real estate ad valorem taxes. The taxes may be determined on a fiscal or calendar year basis and may be payable quarterly, semiannually, or annually with a penalty for late payment.
The tax reimbursement clause should dovetail with this actual timetable."
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3. Landlord's consent to sublease
Whether a landlord's refusal to consent to a sublease to a bank was unreasonable when tenant was a grocery store and landlord had reserved a spot in the shopping center.
from Recent Developments and Trends in Shopping Center Law, 2008 U.S.
Shopping Center Law Conference
"Carr-Gottstein Foods Co. (Tenant) leased space in a shopping center to be used as a grocery store from Norville (Landlord). The lease provided that Tenant must obtain Landlord's written approval prior to subletting and that Landlord must not unreasonably withhold such consent.
Tenant requested Landlord consent to a sublease to a bank.
Landlord withheld consent by demanding 75% of the bank's rent.
Tenant sued Landlord, alleging that Landlord's withholding of consent was unreasonable and in violation of the lease. Tenant argued that Landlord could not withhold consent to a sublease to a bank because under the lease, Tenant was permitted to operate a bank in its store.
Landlord consented that banking was a permitted use under the lease.
The trial court granted summary judgment for Tenant.
Norville v. Carr-Gottstein Foods Co., 84 P.3d 996 (Alaska 2004)
Holding:
Reversed. The Supreme Court of Alaska held that material issues of fact remained as to whether Landlord's withholding of consent to the sublease was unreasonable. Tenant's argument that under the lease Landlord must consent to any sublease that was for a use that would be permitted the Tenant's Use Clause if conducted by Tenant was incorrect as a matter of law. Reasonableness was the only limitation specified regarding the right of the Landlord to withhold consent.
Furthermore, Landlord's proffered reasons for withholding consent – a bank would interfere with Landlord's plan to lease space in the shopping center to another bank, and gross sales, and therefore percentage rents, would be impaired – are legitimate reasonable not impermissible under the lease's terms.
Whether Landlord's reasons for withholding consent were genuine and reasonable under the circumstances were questions of fact to be determined by the tried of fact.
The court also ruled that material issues of fact remained as to whether Tenant's lease permitted general branch banking."
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4. Breathing new life into former big box properties
Flexibility and patience are key to re-tenanting vacant big box facilities.
from Shopping Center Business, November 2008
"Many of the big boxes, including pet stores, discount retailers, electronics and sporting goods retailers of the 1990s have disappeared, often dragging the rest of the shopping center down with them. But when these facilities close, they leave behind opportunities for profit in an interesting real estate market niche: the acquisition and leasing of vacant or partially leased former big box retail locations.
These opportunities are often overlooked by larger developers and owners. It takes a certain kind of investor with specific skills, resources and patience to take advantage of these value-added opportunities successfully.
Big box properties for sale nationwide
No single driver fuels the recent trend of big box properties closing their doors. Mergers and bankruptcies play a key role. In some areas, demographics and market dynamics change, prompting retailers to seek new locations. Retail stores may follow the pull away from historic business core areas to more promising locations. Some retailers may decide to leave a regional market altogether.
Transforming undervalued properties into profit centers
A key advantage of these properties is that existing buildings, with full entitlements, can be acquired at a much lower cost than it takes to build a new facility in today's market.
The greatest challenge is to determine what to do with the building.
The successful buyer must be willing to buy quickly without having to identify a replacement tenant before closing. Further complicating the process is problematic acquisition financing – conventional underwriting standards will usually frown on a vacant big box with its negative cash flow.
With the capability to hold on to and carry a vacant or partly leased property for as long as 18 to 24 months, a buyer can seek potential users and try to anticipate the ways in which the market will develop.
Finding the right use for a former big box store
The first prospects to look at are the retailers who are similar to the former tenants. After that, flexibility is the key.
A typical challenge of big boxes: their extreme depth. Because the majority of retailers do not want depth of 350 to 400 feet (not atypical), owners may simply wall off the back part of the building, tear it down, or find alternative uses for it, such as storage.
Community issues figure in big box property re-use
Vacant big box properties can become problematic for a community. Their visibility can create a perception that the area is not a good retail market. The absence of retail tenants interrupts sales tax revenues.
Facilities can also become eyesores, inviting vandalism and trash dumping.
Some communities can impose complicated or unrealistic requirements on buyers and redevelopers, who must match the desires of the local communities with what is most practical and the best solution for an old location.
Success and profitability in a range of different markets
Many of these vacant big box transactions are one-off deals, too small to interest larger investment companies who have no appetite for risk.
As a nimble, niche operator in smaller markets, with the ability to close transactions fast, a specialist firm can acquire distressed, vacant and even stigmatized properties from different sellers and revitalize them successfully in different ways. To find the best opportunities, the buyer must be looking for properties in several different secondary and tertiary markets that show promise. The important ingredient is the understanding that patience will be required for success in all of these types of acquisitions. That is where the opportunities lie."
For more information see http://www.houstonrealtyadvisors.com/ or http://www.houstonrealtyadvisors.net/
Tuesday, October 14, 2008
POST OAK SALE COLLAPSE
A deal to sell the Post Oak Central office complex is off.
Owners Crescent Real Estate Equities LLC, JP Morgan and General Electric Co. had a contract to sell the three buildings to Los Angeles-based CB Richard Ellis Investors, an affiliate of CB Richard Ellis Group Inc. with $43.7 billion in assets under management. But the buyer is not going through with the deal, sources say.
CBRE Investors was expected to pay about $240 million, or $185 per square foot, for the properties.
Located in the Galleria area, Post Oak Central consists of buildings at 1980, 1990 and 2000 Post Oak Blvd. The complex has just under 1.3 million square feet of office space that is about 92 percent leased.
CBRE Investors was one of nearly a dozen groups that bid on Post Oak Central, according to Holliday Fenoglio Fowler LP, which is marketing the buildings. For more information see www.houstonrealtyadvisors.com or www.houstonrealtyadvisors.net or www.edayres.com
Owners Crescent Real Estate Equities LLC, JP Morgan and General Electric Co. had a contract to sell the three buildings to Los Angeles-based CB Richard Ellis Investors, an affiliate of CB Richard Ellis Group Inc. with $43.7 billion in assets under management. But the buyer is not going through with the deal, sources say.
CBRE Investors was expected to pay about $240 million, or $185 per square foot, for the properties.
Located in the Galleria area, Post Oak Central consists of buildings at 1980, 1990 and 2000 Post Oak Blvd. The complex has just under 1.3 million square feet of office space that is about 92 percent leased.
CBRE Investors was one of nearly a dozen groups that bid on Post Oak Central, according to Holliday Fenoglio Fowler LP, which is marketing the buildings. For more information see www.houstonrealtyadvisors.com or www.houstonrealtyadvisors.net or www.edayres.com
Monday, October 13, 2008
99 Ranch Market hitches Asian post to Houston with first store in Texas
An established chain of Asian grocery stores from California has leased space in a hot corridor of Interstate 10 to open the company’s first Texas location.
The store, 99 Ranch Market, will set up shop in a vacant space formerly occupied by a different kind of international grocery store — Fiesta Mart, which closed at the end of last year. 99 Ranch Market will occupy the 84,000-square-foot former Fiesta space on the northwest corner of I-10 and Blalock in the Blalock Market Shopping Center.
99 Ranch Market, part of Buena Park, Calif.-based Tawa Supermarket Inc., leased the space from Houston-based Weingarten Realty Investors, which was represented by John Wise on the transaction.
The grocery store will offer a variety of Asian products and exotic Far Eastern food when it opens next summer. Products will include Asian delicacies, fresh meat, seafood and produce.
Founded in 1984, Tawa Supermarket has 25 full-service stores in California and Washington. The chain also has licensee stores in Nevada, Georgia and Indonesia.
Jennifer Tsao, a Tawa spokeswoman in California, says the Weingarten site was chosen for the entrance into Texas because it’s conveniently located on the freeway.
The store’s proximity to I-10, however, caused Weingarten to lose quite a bit of the parking lot due to the freeway expansion project several months ago, which is part of the reason Fiesta decided to close its store.
Suzanne Anderson, a regional leasing director with Weingarten, says the parking lot will be restriped to maximize the number of available parking spaces.
“We’re going to have to re-lay out the parking,” she says. “It’s still going to be under what the typical grocery store might have.”
The store itself will gain a new look, but the building will basically stay the same.
“We’re not anticipating major structural changes,” Anderson says. “None of the building is going to be torn down.”For more information see: www.houstonrealtyadvisors.com or www.houstonrealtyadvisors.net or www.edayres.com
The store, 99 Ranch Market, will set up shop in a vacant space formerly occupied by a different kind of international grocery store — Fiesta Mart, which closed at the end of last year. 99 Ranch Market will occupy the 84,000-square-foot former Fiesta space on the northwest corner of I-10 and Blalock in the Blalock Market Shopping Center.
99 Ranch Market, part of Buena Park, Calif.-based Tawa Supermarket Inc., leased the space from Houston-based Weingarten Realty Investors, which was represented by John Wise on the transaction.
The grocery store will offer a variety of Asian products and exotic Far Eastern food when it opens next summer. Products will include Asian delicacies, fresh meat, seafood and produce.
Founded in 1984, Tawa Supermarket has 25 full-service stores in California and Washington. The chain also has licensee stores in Nevada, Georgia and Indonesia.
Jennifer Tsao, a Tawa spokeswoman in California, says the Weingarten site was chosen for the entrance into Texas because it’s conveniently located on the freeway.
The store’s proximity to I-10, however, caused Weingarten to lose quite a bit of the parking lot due to the freeway expansion project several months ago, which is part of the reason Fiesta decided to close its store.
Suzanne Anderson, a regional leasing director with Weingarten, says the parking lot will be restriped to maximize the number of available parking spaces.
“We’re going to have to re-lay out the parking,” she says. “It’s still going to be under what the typical grocery store might have.”
The store itself will gain a new look, but the building will basically stay the same.
“We’re not anticipating major structural changes,” Anderson says. “None of the building is going to be torn down.”For more information see: www.houstonrealtyadvisors.com or www.houstonrealtyadvisors.net or www.edayres.com
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