Leasing

The long-term office lease represents one of the most complex relationships in modern commerce. It spins an intricate web of mutual obligations between tenant and landlord, which can endure up to a quarter century or even longer. It survives a succession of real estate and business cycles, employees and other relationships. For the corporate or institutional tenant, the lease is often its largest single financial commitment. For the landlord, it may determine the property's long-run financial viability.

Entering into such a commitment demands technical expertise of the highest caliber. In the current real estate climate - where the non-rent variable has emerged as the most significant factor in leasing economics - demonstrated effectiveness is required. A tenant must consider an almost endless list of variables, such as negotiating tax and operating expense escalations, work letters, electrical charges, sublease and assignments rights, alterations, and options to expand or renew. Plymouth Partners has earned its reputation by providing comprehensive leasing services across the country. Whether the task involves relocating to new quarters, or negotiating lease renewals or modifications, we are uniquely equipped to advance and protect the interest of our clients.
Plymouth Partners initially bases selection activities on detailed research and analysis, which is the first step in our Proposal Process.

The Recent Clients section describes several of our leasing achievements over the years - each one a case study in creativity, objectivity and proven ability.


Pre-Site Selection Services 

Plymouth Partners initially bases selection activities on detailed research and analysis. Our professionals research and evaluate all relevant financial, technical and operational information pertinent to our client's needs; space availability, tenant profiles, comparable lease transactions and cost data, such as real estate taxes, operating expenses and other escalation factors.

Plymouth Partners also tracks, evaluates, summarizes and advises clients on commercial property market conditions and on economic and demographic factors affecting real estate. We provide financial analysis and modeling for our clients, including discounted cash flow analysis as well as other financial methods to present the financial liability and benefit aspects of proposed transactions, both by themselves and in comparison with alternative projects or investments.

Based on this research, Plymouth Partners identifies and investigates all potential alternative locations. We review these options to meet all pre-defined parameters, such as the geographic, mechanical, structural, ownership/management and economic goals and needs of our client. We then evaluate the impact of all special cost factors, including current leasehold obligations or unusual operating guidelines.

"By objectively exposing the tenant to every opportunity within the market that meets their economic, geographic and space standards, the tenant representative makes it difficult for an existing landlord to feel that the tenant is captive, or for the owner of new space to assume that the tenant is ready to sign."


Post Selection

Plymouth Partners provides a "short list" of opportunities, budgets and detailed schedules for each selected alternative, and conducts negotiations with all landlords on the short list. In appropriate cases, Plymouth Partners will seek public sector incentives. We then implement our client's decision regarding the elected site and manage the project schedule by defining critical dates and providing progress and status reports through the point of completion.


Sales and Investment

Real estate ownership can serve a wide variety of purposes. Physical space control, income generation and long-term appreciation are only a few of these. When the time comes to acquire or dispose of property, other considerations become paramount. Plymouth Partners' sales and investment services specialize in the creative structuring of transactions consistent with the particular objectives of both buyer and seller.

Some of these services are as follows:


• Present and future market analyses
• Studies of building operations and required capital improvements
• Discounted pre-tax and after-tax cash flow studies
• Assemblage and planning for new construction
• Securing of interim and permanent financing
• Location, screening, negotiation and acquisition for domestic and international investors
• Structuring of limited partnership investments
• Capital formation through refinancing and sale-leaseback
• Analysis and negotiation of office condominium opportunities

Technology

Plymouth Partners recognizes that sophisticated technology is necessary not only to analyze property, leases and projects, but also as an amenity that every business - both traditional and technologically oriented - requires. We utilize proprietary software and innovative decision-making capabilities to evaluate all facets of real estate considerations, from the latest information systems to the most advanced analytic tools. Additionally, when making a decision regarding a tenant’s property needs, we understand how high-tech elements relate to corporate success. We enfold information such as fiber optic, T-1 and T-3 accessibility and equipment transfer and installation into property analyses to ensure that our clients are aware of each option and its cost.

Tenant Space Construction

Only in the most unusual circumstances does a tenant find a unit of office space already built out to accommodate its own operational requirements. Most units must be either partially or completely rebuilt before the tenant can move in.

If the tenant elects to take responsibility for the construction, a contribution by the landlord, in the form of either cash reimbursements or rent abatements, can be negotiated to offset some or all of the cost. This, of course, is a negotiable item.

Most tenants, though, prefer that the landlord build the space, since the landlord has more construction experience and can take advantage of volume discounts on materials. This also shifts the responsibility for completion of work to the landlord, and saves the tenant a considerable amount of planning and supervision time. It requires, however, complete planning of specifications prior to signing the lease, since the document will state, in a "workletter" addendum, the landlord’s precise responsibilities in minute detail. The workletter specifies the quantity and type of walls, doors, frames, floor covering, lighting and all other components of the tenant buildout.

Some landlords offer a Building Standard Workletter to all new tenants in the building. It is rare, though, that the specifications in such documents are adequate to the tenants’ needs. This document must be carefully scrutinized, and compared with the tenant’s needs and desires. The cost of items not covered in the standard workletter must be priced and negotiated. Substitution and unit-price clauses must also be negotiated in order to protect the tenant from being charged for materials that are not used.

The workletter, and other sections of the lease relating to construction, are among the most important to properly negotiate. There must be provisions governing delays in completion, for example, which can cause the tenant operational and financial difficulties. A variety of notice provisions must be negotiated, including a requirement that the landlord notify the tenant of a firm completion date in a timely manner.

During the course of a lease, additional renovations are often required. Unless the tenant’s rights to make such alterations are specified in the lease, the landlord may charge unreasonable fees to allow the work to be done. Other necessary provisions include the tenant’s right to choose a contractor, and a release from restoration of the space to its original condition at the expiration of the lease.

• Recommend, and coordinate with, your architect or space planner.
• Assist in the negotiation of architectural and construction contracts.
• Negotiate the financial and legal aspects of the workletter or tenant improvement allowance.
• Protect your interests in negotiating notice provisions and post-lease alterations.

Studies and Analyses

Plymouth Partners conducts a variety of studies and analyses for its clients, ranging from micro to macro subjects. Some of these include:

• Building Operations Studies
• Corporate Relocation Studies
• Demographic Analysis
• Site Analysis
• Feasibility Studies
• Management Studies
• Asset Swap Analysis
• Investment Analysis
• Lease Renewal Services
• Project Consulting
• Property Valuation
• Trend Analysis

Lease-Specific Analyses

As part of Plymouth Partners’ evaluation of client obligations, we conduct in-depth qualitative and quantitative analyses of all issues and expenses that have an impact on a tenant’s occupancy. Since some clients have specific or unusual needs, Plymouth Partners has frequently been asked to evaluate unique possibilities, both before lease signing and during the lease term as a clients’ business or needs change. Some of these issues include changes in physical requirements (such as unexpected growth or downsizing), technical innovations and security.

On the quantitative side, Plymouth Partners develops financial analyses at all stages of the lease term, to adjust for both proposed and actual modifications. Normally, these are presented in spread-sheet format, both detailed and in ‘executive friendly’ format. These break down costs on a line-item-by-line basis, per year, per square foot. All expenses, from rent and escalations through occupancy tax, are included. Specific needs, such as pre- and post-tax, can also be calculated.

Lease Auditing Services

In many cases, Tenants receive complex and questionable rent, escalation and utility bills from Landlords. Unless a lease clearly defines how expenses are calculated (and sometimes the appropriate clauses are not clearly defined) monthly bills can be extremely confusing and beyond the comprehension of even seasoned financial professionals. Plymouth Partners has the ability to verify charges, including:

• Electric Bills
• Rent Escalations
• Operating Expenses
• Miscellaneous Charges (overtime, cleaning, etc.)

Through our Lease Auditing Service, we review current lease commitments, verify expenses and project expenses through the end of the lease term. In most cases, this requires making fact-based projections of escalated items.

The staff at Plymouth Partners has several decades of lease auditing experience, ranging from national portfolios to the facilities of individual tenants. Typically, a lease audit includes the following steps:

• Gather, review and abstract all leases and lease-related documents
• Collect, obtain and review all bills and confirm all payments made by tenant (e.g., rent, escalations, electric, tax)
• Prepare report for client of status or credits and debits, highlighting and any non-standard items
• Perform complete audit of all data (if necessary)
• Retain outside experts (if necessary)
• Contact landlord to confirm records and clarify discrepancies
• Conduct on-going negotiations with landlord regarding discrepancies
• Provide detailed report of discrepancies, both resolved and unresolved

At the conclusion of the audit, Plymouth Partners will be able to confirm the amount of savings through the process. If additional steps or continued monitoring are necessary, Plymouth Partners can provide such services.

Glossary of Office Leasing Terms

Above-Standard Installation
Construction necessary to prepare a space for tenant occupancy in addition to that specified in the Building Standard Workletter.

Amortization of Installation
A method for landlord financing of all or part of the tenant installation, whereby the tenant reimburses the landlord with interest over the term of the lease.

Base Rent
The basic per-annum rental specified in the lease.

Base Year or Amount
The year or amount fixed in the lease as the basis upon which future escalation will be calculated.

Building Core
The vertical backbone of the building, including elevators, air shafts, lavatories, stairways, mechanical shafts, etc.

Building Standard Installation
The workletter specifications routinely offered to all prospective tenants in a building.

Common Areas
Portions of the building designated for the benefit of all or a group of tenants, such as lobbies, corridors, lavatories and mechanical areas.

Direct Pass-Through
An escalation formula through which the tenant is charged its pro rata share of increases in the building’s real estate taxes and/or operating expenses over the base amount or those of the base year.

Effective Annual Rent
The "bottom line" of a financial projection, generated by reamortizing the Net Present Value of the cash flow stream projected over the term of the lease.

Expansion Option
The agreed-upon terms upon which a tenant has a right, but not an obligation, to expand into specific additional space.

Indexed Escalation
An escalation formula that increases the rent each year by a fixed or variable percentage.

Loss Factor
The percentage of Rentable Area that is not Usable Area.

Mullions
Divisions of large windows or glass curtain walls, which permit the division of surrounded space into Building Modules.

Net Present Value
The current value of a future cash flow stream, discounted at a given rate.

Operating Expenses
The cost to the landlord of heating, lighting, air conditioning, maintenance and general operation of the property.

Porter Wage Formula
An escalation formula which increases the rent based on changes in a specified labor rate over those prevalent in the Base Year, sometimes including the cost of fringe benefits.

Profit-Splitting
An arrangement through which profits generated by a sublease or assignment are shared between tenant and landlord, according to a specified formula.

Recapture
The right of the landlord to void a tenant’s lease for all, or a portion, of the premises in order to prevent a sublease or assignment.

Renewal Option
A lease clause specifying the terms and conditions under which the tenant may extend the lease term, without obligating the tenant to do so.

Rent Abatement
A period of time during which the tenant is not charged rent for space under lease.

Rent Commencement
The date upon which the tenant is obligated to begin paying rent.

Rent Inclusion
A separate charge for electricity by the landlord, based on an estimate of tenant usage (which might have little or no relation to the tenant’s actual usage).

Rent Steps
Agreed-upon increases in the Base Rent that take effect at specified dates during the term of the lease.

Rentable Area
The square footage used to calculate Base Rent, which includes Usable Area; a percentage of common and mechanical areas; and, sometimes, square footage that simply does not exist.

Security Deposit
An amount deposited with a landlord to ensure the tenant’s fulfillment of its obligations.

Sublease Rights
The lease clause defining the tenant’s rights, if any, to sublease all or part of its space to one or more other parties, and the consequences of so doing.

Tenant Improvement Allowance
A dollar amount provided by the landlord to reimburse the tenant for costs incurred in constructing the Tenant Installation.

Tenant Installation (or Buildout)
Interior construction necessary to customize the space for occupancy by the tenant.

Usable Area
The square footage exclusively occupied and controlled by the tenant. (Sometimes characterized as "carpetable" area.)

Working Drawings
Architectural drawings required before a building permit can be obtained and construction can commence. (Typically including partition plans, HVAC plans and specifications, plumbing, electrical, reflected ceiling, finish detail, etc.)

Workletter
The landlord’s itemized schedule of specific labor and materials to be provided in constructing the Tenant Installation.