1. BUILD TO SUIT YOURSELF BUILT-TO-SUIT LEASES AND WORK LETTERS Bob Bliss, Bill Carr, Bryan Jackson and Chuck Trainor BUILD TO SUIT YOURSELF BUILT-TO-SUIT LEASES AND WORK LETTERS Bob Bliss, Bill Carr, Bryan Jackson and Chuck Trainor

2. OVERVIEW 1.Who is building what? Deals range from Landlord building “turnkey” to ground leases where takes “as is” and builds all improvements OVERVIEW 1.Who is building what? Deals range from Landlord building “turnkey” to ground leases where takes “as is” and builds all improvements

3. OVERVIEW 1.Who is building what? Deals range from Landlord building “turnkey” to ground leases where takes “as is” and builds all improvements All kinds of variations in between where Landlord and Tenant share construction responsibilities OVERVIEW 1.Who is building what? Deals range from Landlord building “turnkey” to ground leases where takes “as is” and builds all improvements All kinds of variations in between where Landlord and Tenant share construction responsibilities

4. OVERVIEW 1.Who is building what? Deals range from Landlord building “turnkey” to ground leases where takes “as is” and builds all improvements All kinds of variations in between where Landlord and Tenant share construction responsibilities Important to define Landlord’s Work and Tenant’s Work with precision to avoid disputes OVERVIEW 1.Who is building what? Deals range from Landlord building “turnkey” to ground leases where takes “as is” and builds all improvements All kinds of variations in between where Landlord and Tenant share construction responsibilities Important to define Landlord’s Work and Tenant’s Work with precision to avoid disputes

5. 2.Navigating the plan approval process without Losing the Lease 2.Navigating the plan approval process without Losing the Lease

6. 2.Navigating the plan approval process without Losing the Lease Winding up with a building that does not satisfy the expectations of Landlord or Tenant 2.Navigating the plan approval process without Losing the Lease Winding up with a building that does not satisfy the expectations of Landlord or Tenant

7. 2.Navigating the plan approval process without Losing the Lease Winding up with a building that does not satisfy the expectations of Landlord or Tenant Indeterminate delays 2.Navigating the plan approval process without Losing the Lease Winding up with a building that does not satisfy the expectations of Landlord or Tenant Indeterminate delays

8. 3. Walking through the construction landmines Permitting 3. Walking through the construction landmines Permitting

9. 3.Walking through the construction landmines Permitting Defining (substantial) completion of a party’s work (and possibly when another party’s construction period starts) 3.Walking through the construction landmines Permitting Defining (substantial) completion of a party’s work (and possibly when another party’s construction period starts)

10. 3. Walking through the construction landmines Permitting Defining (substantial) completion of a party’s work (and possibly when another party’s construction period starts) Punch List Items 3. Walking through the construction landmines Permitting Defining (substantial) completion of a party’s work (and possibly when another party’s construction period starts) Punch List Items

11. 3. Walking through the construction landmines Permitting Defining (substantial) completion of a party’s work (and possibly when another party’s construction period starts) Punch List Items Coordination of Landlord and Tenant construction 3. Walking through the construction landmines Permitting Defining (substantial) completion of a party’s work (and possibly when another party’s construction period starts) Punch List Items Coordination of Landlord and Tenant construction

12. 3. Walking through the construction landmines Permitting Defining (substantial) completion of a party’s work (and possibly when another party’s construction period starts) Punch List Items Coordination of Landlord and Tenant construction Bonding 3. Walking through the construction landmines Permitting Defining (substantial) completion of a party’s work (and possibly when another party’s construction period starts) Punch List Items Coordination of Landlord and Tenant construction Bonding

13. 3. Walking through the construction landmines Permitting Defining (substantial) completion of a party’s work (and possibly when another party’s construction period starts) Punch List Items Coordination of Landlord and Tenant construction Bonding Delays and Force Majeure 3. Walking through the construction landmines Permitting Defining (substantial) completion of a party’s work (and possibly when another party’s construction period starts) Punch List Items Coordination of Landlord and Tenant construction Bonding Delays and Force Majeure

14. 3. Walking through the construction landmines Permitting Defining (substantial) completion of a party’s work (and possibly when another party’s construction period starts) Punch List Items Coordination of Landlord and Tenant construction Bonding Delays and Force Majeure Deadlines 3. Walking through the construction landmines Permitting Defining (substantial) completion of a party’s work (and possibly when another party’s construction period starts) Punch List Items Coordination of Landlord and Tenant construction Bonding Delays and Force Majeure Deadlines

15. 3. Walking through the construction landmines Permitting Defining (substantial) completion of a party’s work (and possibly when another party’s construction period starts) Punch List Items Coordination of Landlord and Tenant construction Bonding Delays and Force Majeure Deadlines  Remedies, including termination 3. Walking through the construction landmines Permitting Defining (substantial) completion of a party’s work (and possibly when another party’s construction period starts) Punch List Items Coordination of Landlord and Tenant construction Bonding Delays and Force Majeure Deadlines  Remedies, including termination

16. 3. Walking through the construction landmines Permitting Defining (substantial) completion of a party’s work (and possibly when another party’s construction period starts) Punch List Items Coordination of Landlord and Tenant construction Bonding Delays and Force Majeure Deadlines  Remedies, including termination  Rent and Opening Commencement 3. Walking through the construction landmines Permitting Defining (substantial) completion of a party’s work (and possibly when another party’s construction period starts) Punch List Items Coordination of Landlord and Tenant construction Bonding Delays and Force Majeure Deadlines  Remedies, including termination  Rent and Opening Commencement

17. 4.Payment of Allowances and Impact on Rent

18. 5.Insurance Coverage

19. 6.Construction and Equipment Warranties (and effect upon repair clause)

20. 7.Compliance with Laws (with regard to construction and during lease term)

21. 8.Use of Advisors (architects, engineers and other professionals)

22. I. Who Builds the TI's? A. Office Space. I. Who Builds the TI's? A. Office Space.

23. I. Who Builds the TI's? A. Office Space. B. Retail Space. I. Who Builds the TI's? A. Office Space. B. Retail Space.

24. II. What are the Typical Uses of TI Allowances? A.How Big Should a TI Allowance Be? II. What are the Typical Uses of TI Allowances? A.How Big Should a TI Allowance Be?

25. II. What are the Typical Uses of TI Allowances? A.How Big Should a TI Allowance Be? B.Limitations on TI Allowance Uses II. What are the Typical Uses of TI Allowances? A.How Big Should a TI Allowance Be? B.Limitations on TI Allowance Uses

26. II. What are the Typical Uses of TI Allowances? A.How Big Should a TI Allowance Be? B.Limitations on TI Allowance Uses C.Correct Use of Terminology II. What are the Typical Uses of TI Allowances? A.How Big Should a TI Allowance Be? B.Limitations on TI Allowance Uses C.Correct Use of Terminology

27. II. What are the Typical Uses of TI Allowances? A.How Big Should a TI Allowance Be? B.Limitations on TI Allowance Uses C.Correct Use of Terminology D.Stipulated Sums and GMP's II. What are the Typical Uses of TI Allowances? A.How Big Should a TI Allowance Be? B.Limitations on TI Allowance Uses C.Correct Use of Terminology D.Stipulated Sums and GMP's

28. II. What are the Typical Uses of TI Allowances? A.How Big Should a TI Allowance Be? B.Limitations on TI Allowance Uses C.Correct Use of Terminology D.Stipulated Sums and GMP's E.Additional Landlord Fees and Tenant Costs II. What are the Typical Uses of TI Allowances? A.How Big Should a TI Allowance Be? B.Limitations on TI Allowance Uses C.Correct Use of Terminology D.Stipulated Sums and GMP's E.Additional Landlord Fees and Tenant Costs

29. II. What are the Typical Uses of TI Allowances? A.How Big Should a TI Allowance Be? B.Limitations on TI Allowance Uses C.Correct Use of Terminology D.Stipulated Sums and GMP's E.Additional Landlord Fees and Tenant Costs 1.CMFees II. What are the Typical Uses of TI Allowances? A.How Big Should a TI Allowance Be? B.Limitations on TI Allowance Uses C.Correct Use of Terminology D.Stipulated Sums and GMP's E.Additional Landlord Fees and Tenant Costs 1.CMFees

30. II. What are the Typical Uses of TI Allowances? A.How Big Should a TI Allowance Be? B.Limitations on TI Allowance Uses C.Correct Use of Terminology D.Stipulated Sums and GMP's E.Additional Landlord Fees and Tenant Costs 1.CMFees 2.Supervision Fees II. What are the Typical Uses of TI Allowances? A.How Big Should a TI Allowance Be? B.Limitations on TI Allowance Uses C.Correct Use of Terminology D.Stipulated Sums and GMP's E.Additional Landlord Fees and Tenant Costs 1.CMFees 2.Supervision Fees

31. II. What are the Typical Uses of TI Allowances? A.How Big Should a TI Allowance Be? B.Limitations on TI Allowance Uses C.Correct Use of Terminology D.Stipulated Sums and GMP's E.Additional Landlord Fees and Tenant Costs 1.CMFees 2.Supervision Fees F. Strategies for Shifting the Risk of Unknown Conditions II. What are the Typical Uses of TI Allowances? A.How Big Should a TI Allowance Be? B.Limitations on TI Allowance Uses C.Correct Use of Terminology D.Stipulated Sums and GMP's E.Additional Landlord Fees and Tenant Costs 1.CMFees 2.Supervision Fees F. Strategies for Shifting the Risk of Unknown Conditions

32. III. What are Payment and Performance Bonds? What is Subcontractor Default Insurance? III. What are Payment and Performance Bonds? What is Subcontractor Default Insurance?

33. IV. What Happens if a Delay Occurs? A. Delays when the Tenant Builds. IV. What Happens if a Delay Occurs? A. Delays when the Tenant Builds.

34. IV. What Happens if a Delay Occurs? A. Delays when the Tenant Builds. B. Delays when the Landlord Builds IV. What Happens if a Delay Occurs? A. Delays when the Tenant Builds. B. Delays when the Landlord Builds

35. IV. What Happens if a Delay Occurs? A. Delays when the Tenant Builds. B. Delays when the Landlord Builds C. Termination Rights, Abatement and Damages IV. What Happens if a Delay Occurs? A. Delays when the Tenant Builds. B. Delays when the Landlord Builds C. Termination Rights, Abatement and Damages

36. V. How Should Warranties and Construction Defects Be Handled?

37. BUILD-TO-SUIT LEASES: TIPTOEING THROUGH THE CONSTRUCTION MINEFIELD BUILD-TO-SUIT LEASES: TIPTOEING THROUGH THE CONSTRUCTION MINEFIELD

38. BUILD-TO-SUIT (BTS)

39. 1. Refurbish Existing Improvements

40. 2. Remodel Existing Improvements 1. Refurbish Existing Improvements 2. Remodel Existing Improvements

41. 1. Refurbish Existing Improvements 2. Remodel Existing Improvements 3. Finish-Out Shell Space in Existing Improvements 1. Refurbish Existing Improvements 2. Remodel Existing Improvements 3. Finish-Out Shell Space in Existing Improvements

42. 1. Refurbish Existing Improvements 2. Remodel Existing Improvements 3. Finish-Out Shell Space in Existing Improvements 4. Construction on Improved Property (Free Standing Building-Single Tenant) 1. Refurbish Existing Improvements 2. Remodel Existing Improvements 3. Finish-Out Shell Space in Existing Improvements 4. Construction on Improved Property (Free Standing Building-Single Tenant)

43. 1. Refurbish Existing Improvements 2. Remodel Existing Improvements 3. Finish-Out Shell Space in Existing Improvements 4. Construction on Improved Property (Free Standing Building-Single Tenant) 5. Construction on Unimproved Property (Free Standing Building-Single Tenant) 1. Refurbish Existing Improvements 2. Remodel Existing Improvements 3. Finish-Out Shell Space in Existing Improvements 4. Construction on Improved Property (Free Standing Building-Single Tenant) 5. Construction on Unimproved Property (Free Standing Building-Single Tenant)

44. 1. Refurbish Existing Improvements 2. Remodel Existing Improvements 3. Finish-Out Shell Space in Existing Improvements 4. Construction on Improved Property (Free Standing Building-Single Tenant) 5. Construction on Unimproved Property (Free Standing Building-Single Tenant) 6. Ground Lease 1. Refurbish Existing Improvements 2. Remodel Existing Improvements 3. Finish-Out Shell Space in Existing Improvements 4. Construction on Improved Property (Free Standing Building-Single Tenant) 5. Construction on Unimproved Property (Free Standing Building-Single Tenant) 6. Ground Lease

45. A.Lease Issues

46. Commencement Date "Substantial Completion" Commencement Date "Substantial Completion"

47. Substantial Completion The Initial Improvements shall be deemed to have been substantially completed and to be "Ready for Occupancy" when Landlord has completed the Initial Improvements, as certified by the architect preparing the Space Plans utilizing AIA document G704, Certificate of Substantial Completion, and the Initial Improvements are sufficiently complete to permit Tenant to occupy the Property for its intended use, subject only to the Punch List (defined below) and the applicable governmental authority has issued a final certificate of occupancy for the Property or such other approvals required to permit Tenant to occupy the Property. If Tenant and Landlord disagree as to whether the Initial Improvements have been substantially completed, Landlord and Tenant agree that a certificate from an independent architect ("Architect") selected by Landlord and Tenant shall be final and conclusive on that issue.

48. Assignment and Subletting

49. Purchase Options and Rights of First Refusal Who's your daddy? Does the landlord have authority to convey the property? Purchase Options and Rights of First Refusal Who's your daddy? Does the landlord have authority to convey the property?

50. [Expansion Property Slide]

51. CONSTRUCTION ISSUES CONSTRUCTION ISSUES

52. Description of Work Tenant's Specifications (See Appendix C) Description of Work Tenant's Specifications (See Appendix C)

53. Representatives Austin Hill Country Realty, Inc. v. Palisades Plaza, Inc., 948 S.W.2d 293 (Tex. 1997) Representatives Austin Hill Country Realty, Inc. v. Palisades Plaza, Inc., 948 S.W.2d 293 (Tex. 1997)

54. Design Phase Schedule (a)receipt of the specifications from the tenant Design Phase Schedule (a)receipt of the specifications from the tenant

55. Design Phase Schedule (a) receipt of the specifications from the tenant (b) drawing of space plans Design Phase Schedule (a) receipt of the specifications from the tenant (b) drawing of space plans

56. Design Phase Schedule (a) receipt of the specifications from the tenant (b) drawing of space plans (c) drawing of "final plans" Design Phase Schedule (a) receipt of the specifications from the tenant (b) drawing of space plans (c) drawing of "final plans"

57. Design Phase Schedule (a) receipt of the specifications from the tenant (b) drawing of space plans (c) drawing of "final plans" (d) tenant's acceptance of "final plans" Design Phase Schedule (a) receipt of the specifications from the tenant (b) drawing of space plans (c) drawing of "final plans" (d) tenant's acceptance of "final plans"

58. Design Phase Schedule (a) receipt of the specifications from the tenant (b) drawing of space plans (c) drawing of "final plans" (d) tenant's acceptance of "final plans" (e)approval process at each step of the design phase by the representatives Design Phase Schedule (a) receipt of the specifications from the tenant (b) drawing of space plans (c) drawing of "final plans" (d) tenant's acceptance of "final plans" (e)approval process at each step of the design phase by the representatives

59. Delays Excusable Delays Tenant Delays Delays Excusable Delays Tenant Delays

60. Construction Costs Calculation of Base Rent based upon Construction Costs Construction Costs Calculation of Base Rent based upon Construction Costs

61. TALES FROM THE CRYPT Selected Cases on Things That Can Go Wrong in Build-to-Suit Leases TALES FROM THE CRYPT Selected Cases on Things That Can Go Wrong in Build-to-Suit Leases

62. I Can't Believe I Gave Away the Ranch! Neiman-Marcus Company v. Hexter, 412 S.W.2d 915 (Tex. Civ. App. -- Dallas 1967, writ ref'd, n.r.e.) I Can't Believe I Gave Away the Ranch! Neiman-Marcus Company v. Hexter, 412 S.W.2d 915 (Tex. Civ. App. -- Dallas 1967, writ ref'd, n.r.e.)

63. I Can't Believe I Gave Away the Ranch! Neiman-Marcus Company v. Hexter, 412 S.W.2d 915 (Tex. Civ. App. -- Dallas 1967, writ ref'd, n.r.e.) 25 year term with 25 year renewal option I Can't Believe I Gave Away the Ranch! Neiman-Marcus Company v. Hexter, 412 S.W.2d 915 (Tex. Civ. App. -- Dallas 1967, writ ref'd, n.r.e.) 25 year term with 25 year renewal option

64. I Can't Believe I Gave Away the Ranch! Neiman-Marcus Company v. Hexter, 412 S.W.2d 915 (Tex. Civ. App. -- Dallas 1967, writ ref'd, n.r.e.) 25 year term with 25 year renewal option No percentage rent I Can't Believe I Gave Away the Ranch! Neiman-Marcus Company v. Hexter, 412 S.W.2d 915 (Tex. Civ. App. -- Dallas 1967, writ ref'd, n.r.e.) 25 year term with 25 year renewal option No percentage rent

65. I Can't Believe I Gave Away the Ranch! Neiman-Marcus Company v. Hexter, 412 S.W.2d 915 (Tex. Civ. App. -- Dallas 1967, writ ref'd, n.r.e.) 25 year term with 25 year renewal option No percentage rent No covenant of continuous operations I Can't Believe I Gave Away the Ranch! Neiman-Marcus Company v. Hexter, 412 S.W.2d 915 (Tex. Civ. App. -- Dallas 1967, writ ref'd, n.r.e.) 25 year term with 25 year renewal option No percentage rent No covenant of continuous operations

66. I Can't Believe I Gave Away the Ranch! Neiman-Marcus Company v. Hexter, 412 S.W.2d 915 (Tex. Civ. App. -- Dallas 1967, writ ref'd, n.r.e.) 25 year term with 25 year renewal option No percentage rent No covenant of continuous operations Tenant has right to assign lease without landlord's consent (and assignment relieves Tenant of liability) I Can't Believe I Gave Away the Ranch! Neiman-Marcus Company v. Hexter, 412 S.W.2d 915 (Tex. Civ. App. -- Dallas 1967, writ ref'd, n.r.e.) 25 year term with 25 year renewal option No percentage rent No covenant of continuous operations Tenant has right to assign lease without landlord's consent (and assignment relieves Tenant of liability)

67. I Can't Believe I Gave Away the Ranch! Neiman-Marcus Company v. Hexter, 412 S.W.2d 915 (Tex. Civ. App. -- Dallas 1967, writ ref'd, n.r.e.) 25 year term with 25 year renewal option No percentage rent No covenant of continuous operations Tenant has right to assign lease without landlord's consent (and assignment relieves Tenant of liability) Tenant has veto power over all new leases I Can't Believe I Gave Away the Ranch! Neiman-Marcus Company v. Hexter, 412 S.W.2d 915 (Tex. Civ. App. -- Dallas 1967, writ ref'd, n.r.e.) 25 year term with 25 year renewal option No percentage rent No covenant of continuous operations Tenant has right to assign lease without landlord's consent (and assignment relieves Tenant of liability) Tenant has veto power over all new leases

68. But I Couldn't Borrow the Money! Kleiman v. White, 476 S.W.2d 375 (Tex. Civ. App. - Austin 1972, writ ref'd. n.r.e.) Lease contingent upon the landlord obtaining "reasonable financing" But I Couldn't Borrow the Money! Kleiman v. White, 476 S.W.2d 375 (Tex. Civ. App. - Austin 1972, writ ref'd. n.r.e.) Lease contingent upon the landlord obtaining "reasonable financing"

69. Don't Tell Me ‘Reasonableness’ has Meaning; I Drafted This Document! Aycock v. Vantage Management Company, 554 S.W.2d 235 (Tex. Civ. App. -- Dallas 1977, writ ref'd, n.r.e.) Standard of Reasonableness Don't Tell Me ‘Reasonableness’ has Meaning; I Drafted This Document! Aycock v. Vantage Management Company, 554 S.W.2d 235 (Tex. Civ. App. -- Dallas 1977, writ ref'd, n.r.e.) Standard of Reasonableness

70. WORK LETTER FORCE MAJEURE

71. 1.Five Points in Five Minutes Checklist

72. WORK LETTER FORCE MAJEURE 1.Five Points in Five Minutes Checklist Definitions: Landlord vs. Tenant Considerations

73. WORK LETTER FORCE MAJEURE 1.Five Points in Five Minutes Checklist Definitions: Landlord vs. Tenant Considerations Limitations on Delays

74. WORK LETTER FORCE MAJEURE 1.Five Points in Five Minutes Checklist Definitions: Landlord vs. Tenant Considerations Limitations on Delays Has the Project Really Been Delayed?

75. WORK LETTER FORCE MAJEURE 1.Five Points in Five Minutes Checklist Definitions: Landlord vs. Tenant Considerations Limitations on Delays Has the Project Really Been Delayed? Avoid Future Disputes – Use a Reporting Form!

76. WORK LETTER FORCE MAJEURE 1.Five Points in Five Minutes Checklist Definitions: Landlord vs. Tenant Considerations Limitations on Delays Has the Project Really Been Delayed? Avoid Future Disputes – Use a Reporting Form! What Are the Penalties?

77. INSURANCE PROVISIONS IN WORK LETTERS

78. Liability Insurance Issues

79. INSURANCE PROVISIONS IN WORK LETTERS Liability Insurance Issues Certificate of Insurance (ACORD 25)

80. INSURANCE PROVISIONS IN WORK LETTERS Liability Insurance Issues Certificate of Insurance (ACORD 25) Additional Insured Endorsement (CG 2010 1185)

81. INSURANCE PROVISIONS IN WORK LETTERS Liability Insurance Issues Certificate of Insurance (ACORD 25) Additional Insured Endorsement (CG 2010 1185) Primary Insurance

82. INSURANCE PROVISIONS IN WORK LETTERS Liability Insurance Issues Certificate of Insurance (ACORD 25) Additional Insured Endorsement (CG 2010 1185) Primary Insurance Limits of Liability

83. INSURANCE PROVISIONS IN WORK LETTERS Liability Insurance Issues Certificate of Insurance (ACORD 25) Additional Insured Endorsement (CG 2010 1185) Primary Insurance Limits of Liability Per Location Endorsement

84. INSURANCE PROVISIONS IN WORK LETTERS Liability Insurance Issues Certificate of Insurance (ACORD 25) Additional Insured Endorsement (CG 2010 1185) Primary Insurance Limits of Liability Per Location Endorsement Coordination with Indemnification Provisions

85. INSURANCE PROVISIONS IN WORK LETTERS Liability Insurance Issues Certificate of Insurance (ACORD 25) Additional Insured Endorsement (CG 2010 1185) Primary Insurance Limits of Liability Per Location Endorsement Coordination with Indemnification Provisions Is the Contractual Indemnity Insured Against?

86. INSURANCE PROVISIONS IN WORK LETTERS

87. Property Insurance Issues Type of Property Policy

88. INSURANCE PROVISIONS IN WORK LETTERS Property Insurance Issues Type of Property Policy Builder’s Risk Policy

89. INSURANCE PROVISIONS IN WORK LETTERS Property Insurance Issues Type of Property Policy Builder’s Risk Policy Who Owns the Improvements, and When?