News
LEGAL ISSUES OF RIGHTSIZING
November 25, 2008
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| Real estate is one of the biggest wallet chompers when it comes tocompany expenses these days. In this market, more tenants are considering rightsizing to bring those costs down, but there are many legal issues to contend with, cautions Arent Fox's Jackie Weiss, with whom we recently caught up in her 1675 Broadwayoffice. |
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| Jackie with colleagues Karen Candreva and Faige Klein. There are many provisions in lease agreements that can potentially affect rightsizing decisions, Jackie says, such as termination options,sublease rights and the landlord's right of recapture. Tenants should avoid giving up too much space in case of future growth. That's why lawyers, brokers, architects, engineers and HR departments should work together to help tenants analyze their needs. This is happening often enough that some real estate companies are introducing specific rightsizing teams. |
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| One misconception many tenants have is that the landlord will not help them, Jackie says. But they are often willing to work with the tenant to avoid the problems of the early '90s, when it was a workout war zone. But do expect a new wave of lease rightsizings, workouts, and restructurings of other transactions, especially as older CMBS loans mature; Jackie is training and preparing her firm to hit the ground running when they crop up. There are many Gen X and Yersin real estate who haven't had the pleasure of dealing with a workout before, keeping Jackie plenty busy in the coming months. |
