Do You Have These Clauses in Your Lease? Presented by: Steven Doben, Netscout Tim Myllykangas, Cresa

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Agenda Introduction Different Negotiation Approaches Operating Expenses Repair and Maintenance Financial Implications Summary

Introduction

NEGOTIATION APPROACHES

Be Prepared For The Negotiation Deck of Cards Be Prepared to Give Away Something Understand the Critical Points Know What is and What is Not Market Silence is Golden………Stay Firm Time is Your Friend

Operating Expenses Definition Expenses that are building related associated with the operating, maintaining, managing and, at times, replacing capital items in the Office Building (or project as defined per the Lease) Areas of Concern Increases over Base Year / Base Value Selection of Base Year / Base value Gross-Up Provisions Definition Issues

Operating Expenses (Cont’d) What do you have to lose?

Repair and Maintenance Latent Defects Landlord Responsibility Repairs v. Alterations Restoration

Repair and Maintenance (Cont’d) Clearly Define Capital LLs’ attempt to include very briefly, if at all Can be the single largest charge back to a tenant Critical to have standard language that the TM relies upon Clearly define Useful life vs. Lease Term GAAP vs. Industry Practices Amortization formula Base Building vs. Tenant Improvements

Repair and Maintenance (Cont’d) What’s left on the table?

Financial Implications Repair and Maintenance Transfer of responsibility to Tenant Capital Restoration Operating Expenses Additional revenue to the Landlord Base Building v. Tenant Improvement

Financial Implications (Cont’d) Delivery v. Commencement Premise Definition Restrictions to Tenant Improvement Allowance

PITFALLS

SUMMARY Expanding Knowledge 2015…Educating to Improve Profitability

Lease Administrator’s Value as a Team Member The Lease Administrator can add significant value to the lease negotiation process. Points to consider…….

Standards & Benchmarking Value Add Review existing lease documents and historical issues prior to the negotiation. Before the negotiation starts, provide the Transaction Manager with…….

Standards & Benchmarking (Cont’d) A brief bullet point summary of the issues with the current lease All amounts not paid to landlord or due to tenant and why A list of key clauses that do not conform to the standard All other concerns that will remove ambiguity, minimize risk/financial exposure

Standards & Benchmarking (Cont’d) Establish the following STANDARDS within your team: Opex exclusion list Premise definition – exclude “above-ceiling” work Gross-up clauses (if included make certain it applies to Base Year) Capital replacement clause Controllable expense clause Building evaluation to determine base building or demised Premises deficiencies exist

Standards & Benchmarking (Cont’d) Benchmark your Opex costs, in the entire portfolio and submarkets, to provide a measurable standard for annual tracking and savings TIA deduction clause upon renewal

Standards & Benchmarking (Cont’d) Create a Lease Administration Department BENCHMARK grid to compare existing leases and new leases to the standards. This will increase lease clause improvement and allow the company to measure performance of the Transaction Managers. Provide these comments proactively to the Transaction Manager; enhancing the value of you and your department.

THANK YOU Steven Doben, Netscout Steven.Doben@netscout.com Tim Myllykangas, Cresa tmyllykangas@cresa.com