Thursday, October 24, 20198:00 AM – 9:15 AM

Seminar 6

Maintaining a Desired Destination: Redeveloping/Downsizing Anchor Tenant Spaces

Matthew DavisStroock & Stroock & Lavan LLP

Washington, DC

Mark FlorakTaylor, English & Duma LLP

Atlanta, GA

• Warm up exercise. Buzz in with your first name. Identify the movie from whichthe photo comes. First correct answer wins a scratch off lottery ticket, but tosecure the prize you have to tell us about yourself (where you work, Landlord orTenant representation, and any experience with redeveloping and downsizinganchor space and any problems you encountered while doing the same).

• I. Tenant Downsizing Strategies:

– A. Sublease• (i) Is consent required?• (ii) Reasonable consent standard. • (iii) Do consent standards differ?• (iv) Impact of the proposed subtenant use

– B. Additional Lease Provisions

• (i) Restrictions on trade name changes• (ii) Sharing of sublease profits• (iii) Restrictions on changes in use• (iv) Landlord recapture rights. • (v) “Going Dark”/Operating covenants

• II. Landlord’s Concerns• (i) Is consent required?• (ii) Conditions for Landlord’s consent• (iii) Construction/Buildout• (iv) Signage (including monument/pylon signage)

• III. Repurposing An Anchor Tenant Space once within Landlord’s control.• (i) Co-Tenancy provisions• (ii) Lender Issues• (iii) REA Issues• (iv) Restrictions on Use/Waivers• (v) Non-Retail uses• (vi) Office Landlord issues• (vii) Office Tenant issues

• Wake up exercise. No repeat winners. Same rules as before. Buzz in withyour first name. Identify the movie from which the photo comes. First correctanswer wins a scratch off lottery ticket, but to secure the prize you have to tellus about yourself (where you work, Landlord or Tenant representation, andany experience with redeveloping and downsizing anchor space and anyproblems you encountered while doing the same).

• IV. Sample Provisions• Sublease provisions:

a. Generic permitted sublease provision: Notwithstanding anything to the contrary contained herein, Tenantshall have the right, without Landlord’s consent, to assign this Lease or sublet all or any portion of the Premisesto, (a) a parent, subsidiary, or other affiliate of Tenant, (b) an entity with which Tenant may merge orconsolidate, or (c) an entity acquiring a substantial portion of Tenant’s assets; provided such assignment orsublease is subject to all the other terms and conditions of this Lease

b. Permitted sublease for use when a landlord won’t demise a space for a tenant and the entire space is toolarge: Notwithstanding anything to the contrary contained herein, Tenant may sublease that portion of theDemised Premises in excess of _______ square feet (or any portion thereof) (“Surplus Demised Premises”),without the prior consent of Landlord; provided that such sublease is subject to all other terms and conditionsof this Lease.

c. Sublease provision obligating Landlord to recognize the sublease: If Tenant subleases all or any portion of theDemised Premises, then Landlord shall, upon Tenant’s request, execute and deliver a recognition agreementamong subtenant, Landlord, and Tenant wherein Landlord agrees to recognize the rights of such subtenant.

• Reasonable consent standard provision for a transfer: Without limiting the generality of this Article _____, it will bereasonable for Landlord to refuse consent to any proposed assignment or sublease (i.e. a “Transfer”) if, at the time of eitherTenant’s notice of the proposed Transfer or the proposed commencement date thereof (i) there shall exist an Event ofDefault by Tenant or matter which will become an Event of Default of Tenant with passage of time or the giving of notice, orboth, unless cured; (ii) the proposed Transferee is an entity (aa) with which Landlord is already in negotiation as evidencedby the issuance of a written proposal; (bb) which is already an occupant of the Shopping Center; (cc) which is incompatiblewith the character of occupancy of the Shopping Center; or (dd) which would subject the Premises to a use which would (1)violate any exclusive rights or restrictions contained in the lease of another tenant of the Shopping Center, or violate Exhibit_____ of this Lease, or conflict with the primary use of another tenant, (2) require any addition to (including improvementsthereon) or modification of the Premises, or all or any portion of the Shopping Center, or any additional action by Landlord,in order to comply with building code or other governmental requirements, or (3) increase the governmental parkingrequirements for the Premises or the Shopping Center; (iii) the tangible net worth of the proposed transferee, immediatelyprior to and following such Transfer, is less than the aggregate tangible net worth of Tenant and Guarantors, if any, on theEffective Date of this Lease or on the date of Transfer, whichever is greater; (iv) the proposed transferee has less than five (5)years’ experience with respect to owning and operating the same type of business as the Permitted Use of the Premises; (v)the nature of the proposed Transferee’s proposed or likely use of the Premises would involve any increased risk of the use,release or mishandling of any Hazardous Materials (as defined in this Lease); (vi) the business reputation or character of theproposed transferee or the business reputation or character of any of its affiliates is not reasonably acceptable to Landlord;or (vii) the proposed transferee will not qualify as a replacement tenant under any co-tenancy or other similar provision inany other lease or agreement in or affecting the Landlord or the Shopping Center.

• Contraction right provision: At any time after ___________, upon twelve (12) months advance written notice to Landlord(the “Contraction Notice”), Tenant shall have the option of reducing the Rentable Area of the Premises by not fewer than__________ square feet and not more than _______ square feet, subject to compliance with the terms and conditions setforth in this Section. On or before 11:59 p.m. (Eastern Daylight Time) on the last day of the twelve month notice periodreferenced above (the “Surrender Date”), Tenant shall: (a) remove Tenant’s furniture, trade fixtures, equipment, and otherproperty from the Returned Premises (i.e. the Premises less the contraction space); (b) construct a demising wall(s)separating the Returned Premises from the original Premises (pursuant to a plan first approved in writing by Landlord, suchapproval may be withheld, conditioned, or granted in Landlord’s sole absolute and unfettered discretion); (c) disconnectand/or reconfigure any building systems serving the original Premises, so that such systems no longer serve, or remainconnected to, the Returned Premises (in accordance with a plan first approved in writing by Landlord, such approval may bewithheld, conditioned, or granted in Landlord’s sole, absolute and unfettered discretion); and (d) surrender the ReturnedPremises to Landlord in broom clean condition. Concurrently with Tenant’s delivery of the Contraction Notice Tenant mustdeliver to Landlord plans and specifications detailing the work to be performed pursuant to (b) and (c) above.

• Trade name change provision:a. Landlord friendly: Tenant may, without Landlord’s consent, change Tenant’s Trade Name, so long as (i) (a)

concurrently therewith the trade name of substantially all other similar stores owned, operated or controlled byTenant and its affiliates shall likewise be changed to the same trade name, or (b) such trade name change is inconjunction with a sublease or assignment of this lease that does not require Landlord’s consent, and (ii) such tradename does not conflict with the trade name of any other tenant in the Shopping Center, and (iii) Tenant pays the costof all necessary signage changes throughout the Shopping Center. Tenant agrees to provide Landlord at least thirty(30) days’ prior written notice of the name change and to submit to Landlord for approval plans and specifications forsuch sign(s) prior to the installation of the new sign(s).

b. Tenant friendly: Tenant may conduct business in the Demised Premises under the trade name “________________”or under such other trade name as shall be used by (a) Tenant in any of its other locations, or (b) any person or entitythat succeeds to Tenant's business and/or Tenant's rights under this Lease.

• Additional wake up exercise. No repeat winners. Same rules as before. Buzz inwith your first name. Identify the movie from which the photo comes. First correctanswer wins a scratch off lottery ticket, but to secure the prize you have to tell usabout yourself (where you work, Landlord or Tenant representation, and anyexperience with redeveloping and downsizing anchor space and any problems youencountered while doing the same).

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