CFO Studio Magazine with David Huber

22 WWW.CFOSTUDIO.COM 4th QUARTER 2012 REAL ESTATE H undreds of trillions of dollars in commercial mortgages that were placed in service years ago are scheduled to expire throughout the United States in the next three years. As the economy continues to flip-flop, it will be important to keep a careful eye on your company’s landlord and its ability to continue to provide services that may have a material effect on your ability to conduct busi- ness productively, safely, and profitably. Specifically, your landlord could be experi- encing financial or other challenges that, if left unresolved, could hinder your company’s ability to enjoy a productive business environ- ment, irrespective of your making rental payments in-full and on-time. Watch for a number of issues that could signal your landlord is having difficulties or may be headed for them. They could be signs that your landlord may be in danger of losing its building. We’ve uncovered a long list of warning signs about which you should be aware — 33 of them, in fact. Visit www. CFOstudio.com to download the entire list. You may say: “But, we have a lease with many years remaining, we pay rent and have never been late, so they can’t take our space away from us…can they?” The answer to that question is a resound- ing, “That depends.” It depends on a number of factors, from whether or not your landlord will really lose his or her building. The first step is to read your company’s lease. Check all of the clauses that might im- pact your occupancy. Specifically, does your lease provide for self-help (the ability to secure services that the landlord fails to provide) in the event that the landlord defaults in providing services to you? Can you contract for temporary cleaning and other services? Can you secure utilities directly from the utility provider? Can you do the above without putting your company into default of its lease? What if the landlord actually goes bank- rupt and ownership of the building reverts to the lender? Can the lender terminate your lease? Maybe. Does your lease require the landlord to secure a non-disturbance agreement for you from the lender? Has the landlord provided you with that document? A non-disturbance agreement, if written properly, will most often pre- vent a successor, like a lender, from terminating your lease. It is possible that your building could have a greater value or a greater likelihood of being sold if it were vacant. Perhaps a larger tenant, or one that for some reason is more desirable, may want your space. Or, maybe your company’s use of its space is not conducive to the lender’s future plans for the building. With- out a non-disturbance agreement, your com- pany could receive notice to vacate and have little choice but to move, with no recourse. If you believe you have reason to be concerned, do a little detective work. Check with the local property tax department, util- ity companies, and other building services providers to confirm that bills are being paid in-full and on-time. Ask around, too. But, be careful here. You wouldn’t want to spook any- one and create concern about your landlord if problems don’t exist. To learn how you can protect your company, visit www.RealStrat.com or contact Andrew Zezas, SIOR, at Andrew.Zezas@RealStrat.com or at 732 868 0000 x111. Could Your Company Lose Its Lease? TO READ THE COMPLETE ARTICLE, VISIT  WWW.CFOSTUDIO.COM www.CFOstudio.com/the-building-your-company-leases-may-be-in-serious-financial-trouble