Commercial Leasing

May 13, 2021

The Future of Parking Areas

by Oscar R. Rivera

Oscar R. Rivera

In a world where ride services such as Uber and Lyft have become widespread, and electric cars are becoming extremely popular, many are asking themselves what that means for parking lots going into the future. In the past, office and retail tenants relied on serious negotiations and a series of analyses to figure out acceptable parking ratios for their stores and offices. But can we expect the same parking concerns from commercial real estate tenants in the future, or will their focus shift to other interests such as charging stations and drop-off/pick-up zones?

Parking ratios are generally established by local zoning codes. The parking ratio is a statistic commonly used to determine the number of parking spaces available for use by each commercial tenant. The total parking spaces available are divided by the property’s entire gross leasable area, with the ratio most commonly expressed per every 1,000 sq. ft. of property.

Most retail stores require four spaces per 1,000 sq. ft., while restaurants are typically allocated more parking spaces for every 1,000 sq. ft. These numbers can vary depending on the property type.

Besides ensuring that the correct number of parking spots are assigned, big box stores like Marshalls, Old Navy, Best Buy, and grocery stores such as Publix, serving as anchor stores, also require specific parking fields in front of their stores and demand certain parking ratio minimums. It is not uncommon for these tenants to designate protected parking areas, prohibiting landlords from ever changing, rearranging or reassigning their parking spaces, and to maintain architectural control over their parking areas.

November 10, 2020

Oscar Rivera Co-Authors Article for ABA Probate & Property Magazine: “Navigating Early Termination Clauses in Commercial Leases”

by Siegfried Rivera

Siegfried Rivera

Firm co-managing partner Oscar R. Rivera co-authored the lead front cover article for the November-December issue of the American Bar Association’s Probate & Property magazine together with Travis D. Hughes of Atlanta-based Hughes Investment Partners. The article, which is titled “Navigating Early Termination Clauses in Commercial Leases,” focuses on the tolls that the COVID-19 pandemic and the Spring 2020 protests have taken on many businesses and commercial landlords. It discusses important early termination provisions and the need to anticipate likely and unlikely future calamities in commercial leases.

Our firm salutes Oscar for sharing his insights into these timely issues impacting commercial leases with the readers of the ABA’s Probate & Property. Click below to read the complete article.

Probate & Property article

June 30, 2020

House Bill 469 Becomes Effective on July 1, 2020

by Oscar R. Rivera

Oscar R. Rivera

The Governor signed House Bill 469 on June 27, 2020, dealing with real estate conveyances. The bill removes the requirement under Section 689.01, Florida Statutes requiring a landlord to have two witnesses when signing a lease for a term of more than one year.

The requirement for witnesses was limited to a landlord’s signature only and was designed to protect the grantor of the estate in the land. House bill 469 provides that no subscribing witnesses are required for a lease of real property or any instrument pertaining to a lease of real property, eliminating the requirement that two subscribing witnesses be present when the lessor signs a lease with a term of more than one year.

The bill becomes effective on July 1, 2020.

April 20, 2020

Article by John Catalano in Today’s Miami Herald: “Owners of Retail Properties, As Well As Tenants, Will Feel Pandemic’s Bite”

by Siegfried Rivera

Siegfried Rivera

An article authored by firm shareholder John Catalano is featured in the Business Monday section of today’s Miami Herald. The article, which is titled “Owners of Retail Properties, As Well As Tenants, Will Feel Pandemic’s Bite,” focuses on the prospects for rent deferrals and insurance claims for the owners of closed stores and the spaces they occupy. It reads:

. . . It has quickly become apparent that the outbreak of COVID-19 will take a massive toll not only on retail tenants, but also on the owners of retail properties. One of the first places that retailers will look for potential relief will be their lease agreements, which may include force majeure clauses and other provisions that are designed to cover business disruptions caused by catastrophes and acts of God.

These provisions will often list events such as floods, earthquakes, war, strikes, government regulations, civil disorder, etc., as triggers that would delay parties’ obligations under the contract. The applicability of the spread of COVID-19 as a force majeure triggering event may depend on the exact wording used in the lease. Some may generally stipulate “conditions beyond the parties’ control, including but not limited to Acts of God” as qualifying conditions, while others may specify circumstances such as “war, terrorist act, government regulation, disaster or strikes.” While leases widely differ in their form, modern leases for most major retail centers include a carve-out that the occurrence of a force majeure event does not permit late payment or nonpayment of rent by a tenant. Continue reading

March 31, 2020

Commercial Real Estate Lenders, Owners and Tenants Must Compromise to Avoid Collapse

by Siegfried Rivera

Siegfried Rivera

By Oscar R. Rivera and John Catalano

Real estate billionaire Tom Barrack, the chairman and chief executive officer of Colony Capital, warned recently that the U.S. commercial real estate mortgage market is on the brink of collapse due to a predicted chain reaction of margin calls, mass foreclosures, evictions and bank failures resulting from the coronavirus pandemic.

“Loan repayment demands are likely to escalate on a systemic level, triggering a domino effect of borrower defaults that will swiftly and severely impact the broad range of stakeholders in the entire real estate market, including property and home owners, landlords, developers, hotel operators and their respective tenants and employees,” he wrote.

The longtime friend of President Donald Trump surmises that the impact could dwarf that of the Great Depression.

Indeed, the commercial property market is under severe strain domestically and abroad due to forced shutdowns of retail and hospitality businesses during the COVID-19 outbreak. The looming crisis in commercial real estate could eventually cause the Federal Reserve to relax some regulations, allow more forbearance on loans, and buy distressed assets directly by restarting the Troubled Asset Relief Program.

December 11, 2018

Popularity of Food Delivery Apps Prompt Need for Changes at Shopping Centers, Malls with Restaurant Tenants

by John Catalano

John Catalano

With the growing popularity of Uber Eats, Grubhub, DoorDash and other food delivery services, many restaurants and other food service tenants (e.g., coffee shops) are now working diligently to increase their sales through delivery. Part of that process entails changes to their kitchen staffing and meal-preparation techniques, but another important element involves the use of dedicated parking spaces for takeout/delivery orders.

The online food-delivery apps are tapping into the public’s increasing aversion to cooking at home. For the first time ever in 2016, Americans spent more at eating and drinking establishments than on groceries, according to U.S. Census data. The delivery market grossed $30 billion in 2017, but Morgan Stanley estimates it could balloon to $220 billion within the next few years.

The growth in food delivery has even led to the rise of virtual restaurants, which can only be accessed online. These establishments are discreetly nestled away in industrial parks, have no takeout window or signage, and their offerings can only be purchased via Grubhub and other delivery apps.

With the increased demand and competition in food takeout/delivery, savvy restaurateurs are now scrambling to make the necessary changes in order to take advantage of this fast-growing segment of the industry. The result of this changing dining landscape is creating the need for changes to the physical landscape of many malls and shopping centers, namely in the use of dedicated parking spaces for delivery/takeout visitors in order to enable them to make quick and easy stops.

November 26, 2018

Turmoil in Mattress Store Sector Leads to Important Considerations for Property Owners

by Oscar R. Rivera

Oscar R. Rivera

One of the retail sectors that is currently experiencing significant upheaval is the mattress industry. Mattress Firm, the largest mattress retailer in the country, is closing hundreds of stores and scrambling to bolster its digital business as a result of significant sales declines. Bed-in-a-box e-commerce mattress companies are sprouting up and beginning to expand to brick-and-mortar locations, but they are expected to continue to focus primarily on growing their online sales.

Analysts say overexpansion is at the heart of the industry’s troubles. They point to the fact that there are now more mattress stores than McDonald’s restaurants in the U.S. The end result is that the industry is in contraction, which comes at a difficult time for struggling malls and shopping centers while many other retailers are also flailing.

As landlords begin to receive rent reduction and concession requests from mattress store operators, they need to carefully consider and weigh their options. This should begin with a thorough financial analysis of the value of the new lease rates that are being proposed, the long-term impact of the reduced lease payments on the property, the likelihood of leasing the space to a new tenant at comparable rates, and the costs and challenges that would stem from suing a tenant that may end up filing for bankruptcy. This type of analysis can be very difficult to process, as it entails a clear-eyed look at the state of the market, the current vacancy and lease rates, and the marketing and commission costs that would be associated with securing a new tenant.

October 22, 2018

Good Guy Guaranty – What is It?

by Oscar R. Rivera

Oscar R. Rivera

Have you ever heard of this? If you are familiar with leases in the New York City area, you probably have. But if you are not, you might be a bit surprised by it. Like many legal issues that begin in either New York or California, the Good Guy Guaranty is now spreading beyond those borders, and if you are in the business of leasing space, you should become aware of it.

In essence, a Good Guy Guaranty is a pre-negotiated kick-out with the financial backing of a credit-worthy guarantor. The guaranty is in place while the tenant is in possession, but if the tenant gives the landlord sufficient notice that it intends to vacate the premises and subsequently leaves the premises in good condition and as otherwise required by the lease, the tenant and the guarantor are both released.

The landlord benefits from it because it has a guarantor that backs the tenant and a tenant that surrenders possession when they vacate, thereby avoiding the need for the landlord to undertake eviction or abandonment litigation. The tenant benefits in that if it gives the landlord advance notice of its intent to vacate (usually anywhere from six to nine months) and is otherwise in compliance with the lease, it can close, be relieved of future liability and not be sued for damages. And, the guarantor benefits in that if they make sure the tenant complies with the lease, the guarantor is never called upon to pay.

October 17, 2018

New Retail Trend: Coworking at the Mall

by John Catalano

John Catalano

Much has been written about the retail apocalypse, which began in 2010 and appears to have no end in sight with the recent bankruptcy filings by Sears and Toys R Us. As the retail industry searches for ways to stem the tide of declining revenue, and online shopping continues to take its toll on traditional brick-and-mortar stores, one trend has emerged to bring mall owners a modicum of relief: coworking in retail.

In shopping centers across the country, stores that have been left vacant by retailers are being converted into shared office space. Coworking space inside of both enclosed and open-air malls is predicted to grow by an annual rate of 25 percent through 2023, according to a recent report from commercial real estate service provider Jones Lang LaSalle (JLL). Shared office space is expected to reach approximately 3.4 million square feet of retail space by then, concluded JLL.

Part of the attraction of these coworking spaces for mall owners is that such spaces often serve as incubators for new retail and even service companies that could eventually mature to operate their own stores in the future. Mall and shopping center operators also like the fact that these coworking tenants bring added foot traffic to the property. The business owners and employees who work in these spaces represent ideal target customers and prospects for all of the other stores, boutiques and restaurants at the property.

September 24, 2018

Drafting Exclusive Use Contracts That Work

by Oscar R. Rivera

Oscar R. Rivera

The creation of a viable tenant mix is a critical component for practically every shopping center, so retail leases often have a defined “use” clause that limits a tenant’s use of the premises. In certain cases, they also contain “exclusives” giving one tenant the exclusive right to their particular use or to sell certain items, and prohibiting all other tenants from that use or from selling those items in the center.

These “exclusive use clauses” many times have carve-outs to allow another tenant to sell some of the product lines covered by the competitor’s exclusive. This is very common in restaurant exclusive use clauses where, for example, a steakhouse might have an exclusive on “steakhouses” in the center, but its lease contains a carve-out allowing other restaurants to have a steak plate on their menu. The idea here is that most people who want to have steak are going to go to the steakhouse as opposed to the Italian restaurant at the same center that happens to have one steak item on its menu of pastas, pizzas and salads.

The remedies for violations of exclusives are generally rather severe. The tenant whose exclusive is being violated may sue or pay a reduced rent, and oftentimes they will resort to cancelling their lease and vacating the space. As a result, these clauses are always heavily negotiated and must be carefully drafted.