Commercial Leasing in a Down Economy

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In the current economic downturn, commercial leasing has been particularly hard hit. This webinar helps commercial real estate, corporate, and transactional attorneys survive and thrive. It also provides practical guidance on negotiating leases in a weak economy.

Led by experts in commercial leasing and landlord and tenant bankruptcy, the program features a detailed analysis of lease renewal economics, including:

  • landlord profitability
  • tenant costs and savings,
  • timing and negotiating leverage
  • other deal-making issues

It also focuses on bankruptcy issues in commercial leasing and deal structuring, including:

  • Effect of the automatic stay of 11 USC § 362 on the landlord/tenant relationship
  • Assumption and rejection of unexpired leases by debtor tenant and debtor landlord
  • Whether a letter of credit is considered a security deposit
  • Sale by debtor free and clear
  • Lease drafting guidelines with an eye toward bankruptcy concerns
Lawyers and real estate professionals trying to plan strategically and anticipate commercial leasing hazards will find this an extremely valuable program.


Richard Bendit

Richard Bendit is General Counsel for Ventras Asset Management LLC, a commercial real estate advisory firm specializing in developing and implementing asset resolution strategies for mortgage loan and other types of real estate investors. Prior to joining Ventras, Mr. Bendit was a senior member of Tactix Real Estate Advisors, a commercial real estate brokerage company representing tenants and other end-users of real estate. Mr. Bendit was also a Partner in the Finance and Real Estate Group of Dechert LLP. With over twenty years of legal and commercial banking experience, Mr. Bendits diverse background includes leasing, investments, structured finance, securitization and other capital markets transactions. He has managed transactions involving various property types located in the United States, Europe and Japan, with deal sizes ranging up to $2 billion. Mr. Bendit graduated from Emory University with a B.A. in economics in 1985 and from Temple University School of Law with a J.D. (cum laude) in 1994. He has been a frequent lecturer for various commercial real estate organizations, such as the Mortgage Bankers Association and the Commercial Mortgage Securitization Association. He has also published articles on commercial leasing and bankruptcy issues impacting commercial real estate lending.

Doug Simon

As one of the firm's most senior associates, Doug Simon has been with Tactix Real Estate Advisors since 2001. Prior to joining Tactix, Mr. Simon was an Associate in the Real Estate Department of Montgomery, McCracken, Walker & Rhoads. While at Montgomery, McCracken, his practice focused on leasing, construction, and general real estate law. Mr. Simon's legal experience included drafting and negotiating office, industrial and commercial leases, sale/leaseback agreements, like-kind exchanges, and real estate financing and construction agreements. Since joining Tactix, Mr. Simon has continued his involvement in the legal community and has focused his practice on law firm leasing. He is a member of the Pennsylvania Bar Association, member of the Board of Directors of the Anti-Defamation League, and has maintained an active role as liaison to the Association of Legal Administrators. Mr. Simon has lectured to active practitioners on various topics related to commercial leasing through such organizations like the Pennsylvania Bar Institute. He graduated from The Pennsylvania State University in 1994 with a BA in Political Science and went on to receive his J.D., with Honors, from the George Washington University Law School in 1997. Following law school graduation, Mr. Simon went on to clerk for the late J. Sydney Hoffman of the Pennsylvania Superior Court.

Paul A. Rubin

Paul A. Rubin is a partner at Herrick, Feinstein LLP. He represents and advises lenders, debtors, trustees, hedge funds, distressed asset purchasers, insurance companies, acquirers of distressed debt, lessors, corporate directors, investment advisors, and various Bankruptcy and other Courts in connection with proceedings under both Chapter 11 and Chapter 7 of the Bankruptcy Code. His practice also includes pre-bankruptcy planning and strategy, out-of-court restructurings and workouts, and counseling regarding the bankruptcy implications of transactions. Mr. Rubin has significant experience in a wide variety of litigation, including appeals, in federal and state courts, involving lender liability claims, preference and fraudulent conveyance actions, lien priority disputes, lease re-characterization, and other claims that arise in the debtor-creditor context. He has handled several real estate bankruptcies and workouts, recovering collateral through both negotiation and litigation in the Bankruptcy Court, and negotiating and drafting cash collateral orders and plans of reorganization. On the transactional side, Mr. Rubin advises purchasers of assets from troubled companies, and he has significant experience addressing potential insolvency issues affecting stadium financings. He has lectured on several bankruptcy topics including valuation issues in bankruptcy and the acquisition of distressed debt, and he has also authored numerous articles for a variety of legal publications. Three of his articles have been cited in published judicial decisions. Mr. Rubin is a Member of the Board of Editors of The Bankruptcy Strategist and is the editor of Herrick's bi-monthly bulletin, Lending & Restructuring Alert, which reports on significant issues in the lending and insolvency arena.

Yitzhak Greenberg

Yitzhak Greenberg is associated with the Law Offices of Gabriel Del Virginia, in New York City. His practice is focused upon bankruptcy, including the representation of landlords and tenants in bankruptcy. He previously worked for a New York City bankruptcy boutique and clerked for the Honorable Arthur J. Gonzalez, United States Bankruptcy Judge. He was selected by Fordham University School of Law, his alma mater, as a Centennial Fellow, where his responsibilities included assisting in the drafting of The Final Report to the Chief Judge of the State of New York: The Commission to Promote Confidence in Judicial Elections. He recently authored "File for Chapter 11, Get the First Month's Rent Free?" The Bankruptcy Strategist Volume 26, Number 11 September 2009. Prior to practicing law, Mr. Greenberg worked in finance, which experience he has leveraged to provide pragmatic and proactive solutions for clients.


1. State of the Market (10 minutes)
 Introduction-Commercial leasing in the current economy
B.  General Real Estate Market Conditions
C.  Capital and Cashflow- The Impact of Current Market Conditions on Landlord and Tenant Leasing Decisions

2.   Lease Renewal Economics (25 minutes)
 Fundamentals of Lease Renewals
B.  Lease Renewals- Tenant's Perspective
C.  Lease Renewals- Landlord's Perspective
D.  Bridging the Gap Between Landlord and Tenant Expectations

3.  Tenant Strategies for a Successful Leasing Process (20 minutes)
 Timing Can Create or Destroy Leverage
B.  Strategic Negotiations- Efficient Use of Time and Market Conditions
C.   Identifying Alternatives- Assessing Quantitative and Qualitative Issues
D.  Managing the Three Major Cost Drivers- Rent, Square Footage, and Out-of-Pocket Costs
E.  Making the Final Decision- The Lowest Base Rent is NOT Necessarily the Best Deal

4.  Bankruptcy Issues Impacting Commercial Leasing (55 minutes)
 Effect of the Automatic Stay of 11 USC ß 362 on the Landlord/Tennant Relationship.
i.   Very Broad: Stays commencement, or continuation or enforcement against the debtor or against property of the estate; enforcement of a judgment against the debtor or against property of the estate; any act to obtain possession of property of the estate; and any act to create, perfect, or enforce against property of the debtor.
ii.   All action must be taken in the bankruptcy court
iii.   Relief
a. Seek dismissal of petition under ß 305
b. Relief from Stay under ß 362(d)
iv.  . ß 108(b): Extends standstill agreements: ß 108(c): Stays SOL in non bankruptcy court proceedings
B. Bankruptcy courts are required to apply state law to property interests. Butner v. US 440 U.S. 48, 99 S.Ct. 914, 59 L.Ed.2d 136 (1979). See e.g. Matter of Village Rathskeller, Inc. 147 B.R. 665, 673 (Bankr.S.D.N.Y. 1992) (subordination clause of tenantís rights to secured lender is not overridden by a tenantís bankruptcy unless the subordination clause is an express or disguised bankruptcy default clause, or an antiassignment clause.)
C. Debtorís broad forum selection ability coupled with the split among Courts, including Circuit Courts, on key issues impacts the Landlord/Tennant Relationship e.g. stub rent, ß 502(b)(6) damage cap and letters of credit.
D.  11 USC ß 365. Unexpired leases: Assumption/Rejection. Debtor/Tenant Assumption/Rejection
i.   Debtorís primary asset may be the assumption and assignment of its lease(s).
ii.   Prerequisites to assumption
a.  Cure defaults (non monetary/monetary).
b. What constitutes adequate assurance of future performance?
iii.   Time limitation on assumption
iv.   Tenantís obligations during Post Petition and Pre Assumption/ Rejection Period
a. Stub rent
b. Superiority
c. Attorneysí fees 
v.   Restrictions: Shopping Center/Tenant Mix
vi.   Debtor cannot assume a terminated lease (state law determines what constitutes a terminated lease). In re P.J. Clarke's Restaurant Corp. 265 B.R. 392, 399 (Bankr. S.D.N.Y. 2001)(where the Debtor is still in possession and can reinstate its rights under the lease under applicable state law, the lease is ìunexpiredî for purposes of ß 365); see also In re Eclair Bakery Ltd. 255 B.R. 121, 33 (Bankr. S.D.N.Y. 2000) (After issuance of the warrant of eviction and consequent termination of the lease but prior to execution there remains (1) an equitable interest in the property and the potential to reinstate the landlord-tenant relationship, as state law provides, and (2) a possessory interest in the property.)
vii   Must be a leasehold interest and not interesse termini, unvested contractual right to a future interest in the estate.
Debtor Landlord Rejection:
i.   Lessee entitled to treat the lease as terminated
ii.   Lessee may retain its rights under such lease
a. The lessee may offset against the rent reserved under such lease for the balance of the term
b. Shopping center restrictions remain and are enforceable
E. ß 502(b)(6) caps damages from rejection to greater of either one year or 15 percent, not to the exceed three years, of the remaining lease term.
i.   Limited: Caps only damages resulting from termination. Saddleback Valley Community Church v. El Toro Materials Co. (In re El Toro Materials Co), No. 05-56164, 2007 WL 2822019 (9th Cir. 2007).
ii.   Broad: Caps all damages resulting from rejection including tort. In re Foamex Int'l, Inc., 368 B.R. 383 (Bankr. D. Del.); Kuske v. McSheridan (In re McSheridan), 184 B.R. 91 (B.A.P. 9th Cir. 1995) (overruled in part by El Toro).
iii.   Security deposit reduces the landlordís ß 502(b)(6) claim (but in 100 cent dollars)
iv.   Financially solvent companies cannot file a chapter 11 to utilize ß 502(b)(6) to limit liability to the landlord. In re Integrated Telecom Express, Inc., 384 F.3d 108 (3rd Cir. 2004).
F. Letters of Credit: Bankruptcy Proof
i.   Whether a letter of credit is considered a security deposit and, as such, is included in the ß 502(b)(6) cap. In re PPI Enterprises (U.S.), Inc., 324 F.3d 197, 210-211 (3d Cir. 2003); AMB Properties, L.P. v. Official Committee for the Estate of AB Liquidating Corp. (In re AB Liquidating Corp), 416 F.3d 961 (9th Cir. 2005); In re Mayan Networks Corp., 306 B.R. 295 (9th Cir. BAP 2004) (reduces landlord's ß 502(b)(6) claim); but see EOP-Colonnade of Dallas Ltd. Partnership v. Faulkner (Stonebridge Technologies, Inc.), 430 F.3d 260 (5th Cir. 2005)(independent of security deposit if landlord never filed proof of claim).
G. Sale by Debtor Free and Clear: 11 USC ß 363
i.    (f) The trustee may sell property free and clear of any interest in such property of an entity other than the estate, only if-(1) applicable nonbankruptcy law permits sale of such property free and clear of such interest;(2) such entity consents
ii.    (e) Notwithstanding any other provision of this section, Ö, the court, with or without a hearing, shall prohibit or condition such use, sale, or lease as is necessary to provide adequate protection of such interest
iii.   Code does not define the term ìinterest,î a tenantís leasehold qualifies.
iv.   Proactive: Tenant must oppose or demand adequate protection of proposed sale. See Precision Industries, Inc. v. Qualitech Steel, SBQ, LLC, 327 F.3d 537 (7th Cir. 2003) (tenantís failure to object is implied consent to sale and, as result, the tenant forfeit its leasehold interest).
H. Conclusion: Drafting Real Estate Contracts With an Eye Towards Bankruptcy
i.   ß 502(b) characterizing breaches of covenants as torts payable immediately
ii.   ß 502(b) characterizing letter of credit as something other than a security deposit in the lease
iii.   ß 365 Property under construction: Specify that the lease commences immediately and, as such, qualifies as a lease pursuant to ß 365, avoiding issues relating to interesse termini.
iv.   Landlord receives a guarantee through a letter of credit, and that the letter of credit come from the guarantor, assuming the guarantor is less likely to file for bankruptcy.

5.  Q&A (10 minutes)

*This program provides 2 hours of approved participatory CLE credit in CA, CO, GA, IL, NY, OR, PA, TN and TX. Self-study credit is also available for AK, AZ, ME, MO and ND. Approval pending in NC and FL. For more information contact Alexandra Brescia at abrescia@alm.com.

You will receive program download instructions via email approximately two to four weeks after the live webinar on February 23, 2010 .

Registrants have free access to the program for one year.

Email: abrescia@alm.com
Phone: 212-457-7706

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  • Brand: Law Journal Newsletters
  • Product Type: Webinars
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