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So You’re Opening Your Own Law Firm or Searching for Office Space for Your Firm: Tips and Tricks that Attorneys REALLY Need to Know

Monday, April 28, 2014, 2014 6:00 PM – 8:00 PM

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Waite Buckley

Andrew Stein

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SO YOU’RE OPENING YOUR OWN LAW FIRM OR SEARCHING FOR OFFICE NSTITUTE

I SPACE FOR YOUR LAW

FIRM: TIPS AND TRICKS ATTORNEYS REALLY CLE

NEED TO KNOW Prepared in connection with a Continuing Legal Education course presented at New York County Lawyers’ Association, 14 Vesey Street, New York, NY scheduled for April 28, 2014

Moderator: Bari Chase, Esq.

Faculty: Waite Buckley and Andrew Stein, Vicus Partners LLC

NYCLA

This course has been approved in accordance with the requirements of the New York State Continuing Legal Education Board for a maximum of 2 Transitional and Non-Transitional credit hours; 2 Professional Practice./Law Practice Management. This program has been approved by the Board of Continuing Legal education of the Supreme Court of New Jersey for 2 hours of total CLE credits. Of these, 0 qualify as hours of credit for ethics/professionalism, and 0 qualify as hours of credit toward certification in civil trial law, criminal law, workers compensation law and/or matrimonial law. ACCREDITED PROVIDER STATUS: NYCLA’s CLE Institute is currently certified as an Accredited Provider of continuing legal education in the States of New York and New Jersey.

Information Regarding CLE Credits and Certification So You’re Opening Your Own Law Firm or Searching for Office Space for Your Firm: Tips and Tricks that Attorneys REALLY Need to Know April 28, 2014; 6:00 PM to 8:00 PM

The New York State CLE Board Regulations require all accredited CLE providers to provide documentation that CLE course attendees are, in fact, present during the course. Please review the following NYCLA rules for MCLE credit allocation and certificate distribution.

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New York County Lawyers’ Association Continuing Legal Education Institute 14 Vesey Street, New York, N.Y. 10007 • (212) 267-6646

So You’re Opening Your Own Law Firm or Searching for Office Space for Your Firm: Tips and Tricks Attorneys REALLY Need to Know

Monday, April 28, 2014 6:00 PM to 8:00 PM

Moderator: Bari Chase, Esq. NYCLA

Faculty: Waite Buckley, Vicus Law Partners Andrew Stein, Vicus Law Partners

AGENDA

5:30 PM – 6:00 PM Registration

6:00 PM – 8:00 PM Presentation and Discussion

Are You Paying Too Much for Electricity? Probably.

Written by Bert Rosenblatt & Andrew Stein

One of the best kept secrets in the commercial real estate business – or at least, one of the most lucrative secrets – is the degree to which landlords exploit the electricity clauses in their leases. Virtually every tenant over‐pays for electricity. It’s an enormous profit center for building owners and landlords go out of their way to make electric clauses confusing. They do this because it makes them money. Even sophisticated tenants with smart attorneys routinely sign terrible electric clauses – in large part because they don’t fully understand what they are signing.

In NYC, electric is either billed by a meter to the public utility (like you’d have in your home) or by something called “rent inclusion”. If you are a small tenant you typically cannot get your space metered. Electric meters are expensive to install and as such landlords do not generally install them to measure the electric out put of smaller partial floor tenants. Since the majority of tenants in the commercial real estate market in are small tenants (77.1% of all Tenant’s are 10,000 square feet or less according to the Co‐Star Group and independent tracking agency), rent inclusion is prevalent as a method of billing tenants for use of electricity.

Here’s how it works: landlords typically advertise rent inclusion electric at $3.25 or $3.50 per rentable square foot. The question most tenants don’t ask is how much electric do I actually use. If you’re an average office tenant with computers and phones, and basic business equipment, you use about $2.00 per square foot per year. So right off the bat, landlords are making an extra dollar or two per foot per year on everyone deal without anyone being the wiser.

To make matters worse, tenants assume that when they sign up for $3.50 per foot, this is what they will be billed and they don’t pay adequate attention to what the lease actually says. If you think about it, it makes no sense that all tenants would pay the same $3.50 for electric. Ultimately there must be some correlation between what you use and what you pay for. Landlords handle this by giving themselves the right to “survey” your consumption of electricity.

The electric clauses in leases are generally about ten pages long, and they’re as complicated as the philosophy you tried so hard to understand in college. Of course, the landlord makes them complicated on purpose – so that the tenant and often times the tenants attorney’s don’t understand all the implications of the clause. I mention this because as educated as attorneys are they are typically not versed on how electricity is measured and surveyed and will often be unable to articulate how the clause should be rewritten or will be unable to take some of its more draconian language out.

Once a lease is signed and in many cases before even a year of term goes by the landlord will send an electric consultant to the tenant’s office to conduct an “electrical survey” of the premises. This consultant will produce a report that the Landlord will send to you which will likely indicate that you are consuming more electricity than was expected and that as per your lease you will have to pay more for your use.

Landlords routinely make reference to something in their electric clauses called “connected load”. This means that when it comes time to survey (and raise your bill), the surveyor is allowed to presume that every electrical device you have is turned on and being used at full capacity 24 hours a day, 7 days a week. This is not fair or accurate, but tenants and lawyers miss this distinction all the time. What is fair and accurate is a tenant being billed on their “demand load” – or what they actually consume.

This practice of surveying you and incrementally increasing your electric bills can go on for years and in some cases can become so egregious that a Tenant will end up paying tens of thousands of dollars a year in additional electricity.

Unfortunately, from a legal standpoint, the landlord is doing nothing wrong. If the tenant signs off on this, shame on them. In fact, there’s a major landlord in NYC that has in the first draft of all its leases, the right to survey and increase the tenant’s cost for electricity if the price of electricity has gone up since July 1st 1970. And this is not a type‐o – 1970! You literally can’t make this stuff up. Believe it or not many smart business owners and their attorney’s miss this and other like minded electrical clauses – and then they end up paying the price. This is a common problem and a time tested profit center for landlords – so make sure you have a knowledgeable tenant representative real estate broker and real estate attorney that look carefully at the these onerous electrical clauses so they can be negotiated out or mitigated.

Depending on the credit worthiness of a tenant, the state of the market, and the needs of the landlord, these clauses can be altered to reasonability and accurately portray what you actually consume in electricity, so make sure you don’t just sign your name without being crystal clear what you are getting into.

Top 5 Law Firm Buildings

Written by Bert Rosenblatt & Andrew Stein

Looking to rent office space for your law firm? Here’s where the best of the best make it happen. Like most other commercial real estate tenants, most law firms call Midtown home; though there are some that have moved downtown in the past few years.

1. 4 – Known as the Condé Nast Building, is an eco‐friendly modern skyscraper in Midtown. The major office space tenants in 4 Times Square are composed of Condé and the law firm Scatten, Arps, Slate, Meagher and Form, the wealthiest law firm in the United States. The building stretches 48 stories high, making it the 12th tallest building in New York City.

2. 825 Eighth Avenue – Also known as One Worldwide Plaza, 825 Eighth Avenue is part of a three‐building, mixed‐use commercial and residential complex. One Worldwide Plaza is the commercial component, stretching 49 stories high. The building has three separate entrances meant to accommodate the various commercial tenants in the building, which formerly included international advertising agency Ogilvy & Mather. Currently, 825 Eighth Avenue is home to the law firm of Cravath, Swaine and Moore, who occupy 600,000 square feet of space.

3. 1155 Avenue of the Americas – Home to the North American offices of law firm White & Case, 1155 Avenue of the Americas is a 40‐story skyscraper designed by Emery Roth. It’s home to 400 White & Case lawyers, and it’s been the home of the firm for many years.

4. 450 – Home to law firm Davis Polk, 450 Lexington Avenue stretches above , boasting 40 stories. Built over the historic Grand Central Station Post Office, the building makes a strong statement on an important site while still remaining true to the architectural details of its base. Davis Polk currently leases 650,000 square feet at 450 Lexington Avenue.

5. 140 – Of course, you cannot neglect downtown Manhattan, where the space is cheap and the views are just so‐so. Located between Liberty and Cedar Streets in the Financial District, 140 Broadway is a 52 story, 1.2 million square foot office space tower. Law firm Chang & Boos currently calls 140 Broadway home.

Where to Find the Cheapest Office Space

Written by Bert Rosenblatt & Andrew Stein

If you’re looking to find the cheapest office space in New York City, there’s nowhere better than downtown Manhattan (defined as south of Chambers Street river to river). The Wall Street area has always been thought of as the ugly stepsister to fancier and more well connected Midtown, and prices reflect this way of thinking. Back in early nineties, downtown was languishing, thanks to a recession. The vacancy rate was high, and the Giuliani administration came up with the idea to incentivize tenants to stay downtown.

These incentives have, since the early nineties, continued to be renewed. After September 11th, downtown plummeted again, people were abandoning ship left and right. The Wall Street Journal up and moved their people within days of the attacks, and the city figured the only way to get people back downtown was to incentivize their renting there. Since 9/11, downtown has pretty much recovered. Almost the entire south side of Wall Street has been built up, mostly with residential condominiums, and this has breathed life into the rest of the area.

Currently, there are incentives available both for tenants moving from Midtown to downtown and for those moving to downtown from elsewhere. If you’re looking for cheap rent, downtown is the place to be – the current incentive offers $10/square foot off your rent over the course of five years.

‐ This means you get $2.50 off/square foot for the first three years

‐ The fourth year, you get 2/3 of $2.50 (or $1.66) off/square foot

‐ The fifth year, you get 1/3 of $2.50 (or $.83) off/square foot

‐ This equals out to $10 over five years. For a little perspective, if your rent is $25/square foot, the incentive turns it into $22.50/square foot, which can really add up!

Interestingly, Midtown currently has a higher vacancy rate than downtown. This is perhaps thanks to the fact that the rents are lower downtown, which has led to a more diversified real estate portfolio. Many non‐profits and creative firms have come downtown, setting up shop alongside the financial institutions that have historically dominated the district.

Downtown Manhattan is the best deal two times over – 1. It’s always cheaper than Midtown and 2. economic incentives are available. Add these together and you’ve got yourself the cheapest office space on the island. You can read more about the downtown incentives here: http://www.nycedc.com/FinancingIncentives/TaxExemptions/LowerManhattanInc ent/Pages/LMIncentives.aspx. BLEND AND EXTEND

Written by BERT ROSENBLATT & ANDREW STEIN

So you signed your office lease at the top of the market, you’re paying a small fortune in rent, but your space is only worth a fraction of what you’re paying. What can you do to lessen your financial burden? Blend and Extend…here’s how it works: Let’s say you’re paying $70 per square foot and you have two years left on your lease. But in today’s market your space is worth $50/s.f. You’re $20/s.f over market. You want some relief and you want it now.

Here’s an approach that works for many tenants:

You have two years left on your lease commitment. You are paying $20/s.f. above the market for each of these years. That’s $40/s.f. in total over market (20 times 2).

Now, if you extend your lease out an extra ten years and do it now, you tell the Landlord you want to create a blended rate of old and new. The way this works is you divide the $40/s.f. that you are over market into the new ten year term. Or in other words divide 40 by 10 and you get 4.

If you did not have the old $70/s.f. commitment you could make a deal at $50/s.f. But since the landlord is not going to just forgive that high rent, you will agree to blend in the overage and instead of paying $50/s.f. you will pay $54, but it will start immediately.

This is a win-win for both Tenant and Landlord. For the Tenant it’s a win because it lowers your immediate costs. That $16/s.f. savings can go into your business or into your pocket. For the Landlord, it’s a win for two reasons. One, you have not forfeited any money – you’ve just re-structured when you’ll get it. And two, you have secured a long-term lease with an existing tenant.

This is extremely valuable to a Landlord because banks and other lending institutions value buildings based on Net Operating Income over time. If a building has leases expiring in less than 5 years, banks are likely to discount that portion of the operating income. However, if a building has a tenant in place for ten years or more, lenders feel secure and buildings are valued at higher numbers.

Many Landlords make a lot of their money not through collecting rent or selling their buildings, but rather by re-financing the asset or modifying the loan agreements. The key for Landlords in doing this successfully is to have fully occupied buildings with long terms leases.

Will Landlords always work with Tenants in this way? Of course not. But it is worth a shot because MANY will. Keep in mind this only works if there’s a significant delta between what you are paying and what the market will bear. According to Co-Star Group (a national independent tracking agency) office rents in NYC have dropped 42% from the highs in 2007. However, in the past few quarters, rents have started to inch back up. From a tenant perspective, this signals a time sensitive opportunity to lock in a great rate before the market fully recovers.

CONFLICT OF INTEREST: THE PROBLEM WITH BEING ALL THINGS TO ALL PEOPLE

Written by BERT ROSENBLATT & ANDREW STEIN

We’ve talked a lot in the past about the importance of businesses using a tenant representative broker, but wanted to take this opportunity to go a little deeper into why having someone exclusively on your side is so important.

Recently, a transaction was memorialized in one of the major NY publications. A major commercial real estate firm represented an owner in the sale of their building. The same firm also represented the group that bought the building. The same firm also had brokers who were limited partners in the building. And the same firm also had brokers meeting with tenants in the building, pitching their services and saying essentially “don’t worry about it,

I’m going to be your un-wavering advocate.”

Really?

The idea that you can be all things to all people, in real estate as in life, simply does not work. It’s based on a flawed premise and over time it will fail.

And when it inevitably fails, it will be the tenant, not the landlord who gets the short end of the stick.

Occupancy costs generally are the second largest line item, after salaries for most companies. The difference between an ok deal on your lease and a great deal on your lease has huge implications to the health and even the sustainability of a business over time. As a tenant, you deserve an advocate with no agenda other than getting you the best possible space at the best possible terms and conditions. You do not want your broker to be in anyway conflicted about who he or she is fighting for.

This is a big deal, people. Know who is in your corner. Know to whom they have pledged their fiduciary obligation. You deserve to be clear on this very important point.

Is it possible to get a good or even great deal using a broker from a full service firm? Yes. There are some very capable people working at these firms.

The problem is that their model is compromised and inevitably, moments arise that challenge a broker’s integrity and fiduciary alliance. As this dynamic plays out in deals if often cost the Tenant money. Sometimes big money.

These moments of compromised integrity happen all the time. Sometimes they are subtle, sometimes not but they are too often the nature of things when to many interests are at play. A senior broker who runs a building says to a junior broker representing a Tenant in the same building, “don’t push so hard on price with this tenant.” Too often, the junior broker backs off and the tenant pays for it. This exchange happens every day and we have seen it play out first hand.

It is laughable for our fictional widow to work with an attorney whose partner represents the other side of the case. Very few people are going to argue that it serves the widow to hire such an attorney. But this is exactly what tenants do every day in working with full service brokers. These firms make huge fees being all things to all people. It serves these firms very well. The problem is, it doesn’t serve the tenant.

As seen in Mann Report

es The Eight Mistakes Tenants Make t When Leasing Office Space dvoca

A by Bert Rosenblatt and Andrew Stein, Vicus Partners, LLC ’s t 1. Lack of Planning: Believe it or not, many ten- 5. Doesn’t Check Lease Terms: A tenant must read and under- ants aren’t clear on what exactly they need. If stand the lease terms carefully. Let’s say the landlord has the right you’re out looking for 10,000 feet, but you actually to relocate you to another floor or space in the building (something need 12,000, you’ve got problems. Have an archi- that is common in the marketplace), how much notice do they tect do a space program and figure out what size need to give you? What if the lease says 30 days, can you really you need. A lot of architects will do this for free pack up and execute a move of both your physical stuff and your

The Tenan as a favor to your tenant rep broker. Additionally technology in 30 days? Probably not. between a good architect and a good broker, you can get clear on things you might not be thinking 6. Underestimates Negotiating Leverage: Tenants have a ten-

ES about, like floor load capacity; if you have a lot of dency to think that the landlord is all-powerful, but that’s not the L equipment, then you may need reinforced floors. case. Ultimately, a landlord is in a service business, and his busi- C Knowing the details up front will save you time, ness is to keep his building full. If this means he has to negotiate money and aggravation down the road. with his tenants to fill his spaces, he will. This is especially true for RTI

A small tenants; you have more value than you think. 2. Lack of Tenant Representation: We could write an entire ar-

HE ticle on the benefits of using a tenant representative (oh wait, we 7. Works With a Biased Broker: Tenants sometimes feel that if

T already did!), but suffice it to say there’s really nothing better than they’re hiring a big real estate company, they’ll be better repre- hiring one to be on your side. A broker understands the ins and sented. The big firms that represent both tenants and landlords outs of the market; they can negotiate for you, and best of all, can will argue that they know all the angles because they know narrow down the buildings that would be best for your particular the tricks of the trade on the landlord side and will use this business. Their know‐how and advice are indispensable, and they knowledge to help you, Madam Tenant. However, even a large can prevent you from leasing a space that you’ll just end up leaving tenant is not nearly as valuable to this big broker as an entire a few months down the road. Such is also the case with an attor- building or an entire portfolio of buildings. These duel agency ney. Many tenants hire lawyers that don’t specialize in commercial firms make the bulk of their money repping owners. And even real estate — this is a mistake. Like your tenant representative, you if the big firm doesn’t currently represent the particular owner need an attorney who understands the monster that is commercial of the particular building you’re negotiating with, they want to real estate. — badly — because there’s a lot of money for them if they get the assignment. 3. Lack of Document Inspection: One of the most common mis- takes tenants make is that they’re not careful enough with what 8. Doesn’t Have Enough Time: Tenants drastically underesti- they sign. Landlords think long and hard about how to make as mate how long it takes to either renew a lease or to move. Getting much money as legally possible on their buildings. And guess the right deal is a process — part dance, part dog fight — and it what; that long lease they give you is not designed to be fair. It is takes time. Depending on how much space you have and how explicitly constructed to make them money. Further, the owner- complex your technology is, it could easily take six to 12 months to ship documents need to be vetted too. Make sure your space is negotiate your deal (double or triple that if you’re really big). legally zoned for commercial purposes, and for your use in par- ticular, and that it conforms to various safety codes and is built in accordance with the prevailing rules and regulations. Bert Rosenblatt Principal 4. Hastily Agrees To Rent and Security Deposit Price: Before Tel: 212-880-3746 Ext. 6619 agreeing to the monthly rental, many people do not benchmark [email protected] similar properties and end up paying rent through their nose. It is important to compare similar office properties and find out the go- Andrew Stein ing market rent in that area before entering into negotiations with Principal the owner. This is Real Estate 101 for tenant rep brokers. Hire Tel: 212–880‑3747 Ext. 6620 them — they know what they’re doing. The security deposit must [email protected] also be based on demand, supply and the regular market norms. However, if the owner of the office space seems to be in a tearing Vicus Partners, LLC hurry to rent out his place, you can always negotiate with him and 275 , Suite 620 save yourself some money. New York, NY 10016

Hidden Costs To Look For When You Sign A Lease

Written by Bert Rosenblatt & Andrew Stein

Given that most commercial real estate leases are upwards of 70 pages long, it’s easy to miss a few details here and there. That’s why it’s generally advised that you hire a tenant representative broker, as he/she will be trained to look out for the important parts of the legal jargon. However, whether you’re planning on utilizing the services of a tenant representative or not, there are a few hidden costs you should keep your eyes out for when scanning your new lease.

1. Electricity: Make sure you read the fine print when it comes to electricity in your new office space, because all contracts are written to try and confuse tenants (this works in the landlord’s favor). If you’re not careful, the number that you’re quoted could go up as much as 100% in a 5 year period. For example, on the day you move in, you could be paying $3.50/square foot for a 5,000 square foot space. This adds up to $20,000 a year for electricity. However, in most cases, landlords have clauses written into their leases that allow them to “survey” your space and then up your rate.

ƒ A common practice is for the landlord to send in an electrical surveyor who will look at all your office equipment and make calculations presuming that everything is running full tilt 24/7. This trick is called assessing electrical usage based on “connected load” as opposed to “demand load” or what you actually use.

ƒ So even though you’re starting out at just $3.50/square foot, you could easily be forced to pay significantly more as early as the second month of your lease.

2. Freight Elevator Time: When you move into your new building, you can’t just lug those desks up the normal passenger elevator. You’re required to use the freight elevator, and unfortunately, this happens after business hours. This means that any moving has to be done after 5PM or on weekends. If you’re not careful, your landlord may charge you for the usage of the freight elevator, as well as for a union guard to be present. ƒ You could be looking at $500/hour to move in, and considering that moving an entire office space is going to take many hours, usage of the elevator quickly adds up.

ƒ Tenants often don’t think they can negotiate the price or usage of the freight elevator. You heard it here first: you can negotiate just about anything. Make sure you talk to your landlord about using the freight elevator and not being charged for doing so.

3. Light bulbs/Miscellaneous Maintenance: If you don’t read your lease carefully, your landlord might just include a cause that dictates that only their workers can change the light bulbs in your office space. That means they could potentially charge you $100 every time a light burns out. It sounds ridiculous, but if you don’t have it written into your lease that you, as the tenant, have the ability to change your own light bulbs, you’re looking at racking up them dollar signs pretty quickly.

4. Real Estate Taxes: it is of the utmost importance to figure out how the real estate taxes in your building are being billed. You need to understand what will happen to you and your rent if the taxes of your building go up, and how those sorts of figures are calculated.

ƒ In short, what is fair is that you pay a proportionate share of the real estate taxes above a base year. What does this mean? Let’s say the total real estate tax on a building this year is $1,000 and you have one of ten floors (10%). Your base year should be equivalent to $1,000.

ƒ In year 1, you don’t pay anything (remember you only pay your share above the base). The next year the total real estate taxes go up $100 to $1,100. You are responsible for 10% of the $100 increase or ten bucks. Of course it’s impossible to know for sure what taxes will be going forward. A reasonable estimate of what it will actually cost you (in NYC) is 35 cents per year compounding starting in year two.

5. Preexisting Condition Clause: Most leases have a clause that states that when you move out of your office space, you must deliver it back to the landlord in its preexisting condition. That means all those walls you paid to put up must come down. All that specific task lighting you had installed must be uninstalled. That vibrant paint must be returned to builder’s beige. These sorts of expenses are negotiable, but don’t count them out – the more work you do, the more you could be paying to undo in the coming years.

In short, make sure you or your tenant representative broker read every last word of that lease, because if you’re not careful, you’ll end up paying out the ear for things you didn’t anticipate paying a dime for.

Good Guy Guarantees: What They Are and Why Landlords Want Them

Written by Bert Rosenblatt & Andrew Stein

A Good Guy Guarantee is a limited personal guarantee that, once signed, legally enables your landlord to pierce the corporate veil and legally go after you personally only in the event that you stop paying rent and refuse to vacate the space.

Say you are a tenant and your business fails. You vacate your office space and give it back to the landlord. This makes you a “good guy.” You have behaved yourself, the Landlord can re-let the space and if there are assets left in the corporation the Landlord is free to go after them. But so long as you are a “good guy” and vacate your space, the Landlord has no further recourse against you personally and cannot pierce the protection of the corporate veil.

However, if after a business failure, you stop paying rent and refuse to leave your space, therefore forcing your landlord to evict you (something that often takes a year or more), then you are a bad guy. Under the terms of the Good Guy Guarantee, the landlord can now go after you personally.

From a landlord’s perspective a Good Guy Guarantee is an insurance policy against the amount of time it can take to evict a tenant. This legal process can take over a year, and during that time, the landlord can’t rent the space or recoup any of its losses.

Hence, it’s common for landlords to require tenants to sign a Good Guy Guarantee. It is a mode of financial and legal protection for the landlord. It also makes staying in an unpaid space extremely unappealing to the tenant.

A Good Guy Guarantee is not a blanket personal guarantee. Instead, it should be looked at as a promise (with some teeth to it) that the tenant will return the space to the landlord if it can no longer pay rent.

A Good Guy Guarantee isn’t necessarily onerous to the tenant. If worded properly, it’s a reasonable legal document. This being said, tenants should make sure that they check the wording of their Good Guy Guarantee with a figurative microscope. Often, landlords will add language that creates an additional liability for the tenant. A common tactic is for landlords to try and capture an additional 3-6 months of rent payment from the signatory of the Good Guy. They do this by wording the Good Guy Guarantee in a way that requires the tenant to give 3-6 months notice if they plan to vacate. A tenant is rarely able to provide such notice in a dire business situation and as such an insertion like this works as a tool the landlord can use to extract a pound of flesh.

Two other scenarios to be particularly aware of are – one if you sublet your rented space, and the other is if your company is sold. In the case of a sublet, should your sub-tenant decide to be a bad guy, and not vacate the space when the lease is up, the landlord is going to look to you, personally, until the sub-tenant is out. The same is true if your company is sold. Even if another entity or individual acquires your company over the course of your lease, your name is still on the Good Guy and as such it’s you who are responsible should things go wrong.

Depending on the credit worthiness of a tenant, the state of the market, and the needs of the landlord, these clauses can be negotiated out or mitigated, so make sure you don’t just sign your name without making sure you are crystal clear what you are getting into.

How Long Does the Leasing and Moving Process Take?

Written by Bert Rosenblatt & Andrew Stein

Depending on the size of the office space needed, as well as the detail required to oversee the leasing process, you’re looking at anywhere from 5 months to a year and a half when all is said and done. The amount of time it takes to lease a new office space and move into it varies greatly from tenant to tenant, but there are some rules of thumb you can consider.

Real Estate Site Selection Process and Negotiation. is always the first of this process and generally takes anywhere from 30 to 90 days to complete.

‐ Determining the criteria, completing a needs assessment and setting up programming can run anywhere from 5 to 7 days. ‐ Searching for and finding three final properties to start negotiating on generally takes about 2 to 4 weeks. ‐ Negotiating simultaneously on three properties until one is selected can take anywhere from 1 to 4 weeks.

Bigger = Sooner. The bigger your company is, the sooner you should start looking. Large companies often start looking for a new lease two years ahead of time. Smaller companies can start 7 months ahead of time; but remember that the earlier you start, the better off you’ll be.

Lease Negotiations and Signing. The lease document has to be fully negotiated with both the tenant’s attorney and that of the landlord, then it must be drafted and signed by both parties.

‐ The negotiations and signings of a lease can take up to 30 days. ‐ Negotiations themselves can be protracted or abbreviated – expect anywhere from 30‐120 days.

Space Construction. Known as “building out” in the office space world, the construction of your new space can take anywhere from 30 days to as long as 6 months to complete. This depends on the level of detail of your space and the constructional limitations of what do your builders have to work around

‐ A construction permit generally takes 7 to 30 days to acquire ‐ Preparation of fully scale architectural drawings can take anywhere from‐30 to 60 days.

Adhering to a smart timeline, along with securing a good team of professionals, ensures that you’ll get a great office space for your company without having to pay out the nose for it. More time equals more search leeway and therefore, more negotiating power with your landlord. Regardless of your company’s position, adhering to a strict timeline will afford you, the tenant, the most opportunity to get the deal that you want.

DO SMALL TENANTS MATTER TO LANDLORDS?

Written by BERT ROSENBLATT & ANDREW STEIN In a word, yes. Why? Because Small Tenants are the lifeblood of Manhattan’s commercial real estate market. Really? Look at the graph below…36% of commercial tenants rent less than 2,500 square feet of office space. In the world of big time Manhattan Commercial Real Estate, do you know what 2,500 square feet is?

An after-thought for most brokers and Landlords Right? Funny… Look at the next bar on the graph… 22% of the market is between 2,500 and 4,999 square feet. Do yo u know what 5,000 square feet is? A slightly bigger blip on the radar screen right? Not or worthy of a Crain’s article…but maybe 5,000 square feet starts to mean something to someone right? Actually, there’s someone to whom this size Tenant means a lot. Landlords…Those guys who own buildings and pay mortgages. They live and die on the income generated by these “small” tenants. While many brokers may not be interested in these deals, do not be mistaken…they matter. We’re talking about 58% of the market…which by no one’s standards is an insignificant piece of the pie. 58% of the NYC Office Leasing market is comprised of Tenants doing these small deals? Yes. It’s worth saying again…58% of the Tenant’s that do an office leasing deal in Manhattan in a given year are groups that occupy less than 5,000 square feet. So even if you make up that your Landlord and or his broker doesn’t want to deal with you…you Mr. Little Tenant are massively important to the market, to the owners of the these buildings, to the New York City economy and to the basic health of the Manhattan commercial real estate market. Okay…I get it…I matter. What can I expect? As a small tenant you can expect to be taken seriously by your landlord. You do matter. You as an asset class are a significant portion of a Landlord’s revenue. And therefore, it is important for you to understand your own worth to a given Landlord. At the end of the day, the greatest thing anyone can do to increase their leverage in a negotiating scenario is to know your own value.

Further, something that often gets overlooked is the reality that small tenants rarely occupy space in buildings alongside large corporate tenants. A 50,000 square foot floor is not going to have a 49,000 square foot tenant sharing a floor with a 1,000 square foot tenant. Floors don’t get divided in this way.

What happens is that large corporate tenants often require their buildings to have large floor plates that are not conducive to a smaller Tenant. Big corporations tend to take up multiple floors, if not whole buildings. Small tenants, on the other hand, tend to be grouped together. There are many buildings that are conducive for smaller Tenants. In fact, if you were to take a survey of New York City’s commercial buildings, you’d find that there are far more buildings that cater to smaller tenants than larger tenants. And in these buildings, smaller tenants certainly do matter. Landlords in these buildings spend most of their time dealing with small tenants. So don’t be afraid to do your research and ask for what is fair. Your landlord can’t stand to lose you.

-4241 | www.vicuspartners.com ITRA

______As Seen in ______Issue 31

Vicus Partners, LLC l New York City, NY Peeling the Big Apple The Submarkets of New York City

B Y A NDREW S TEIN & B ERT R OSENBLATT ITRA / V ICUS P ARTNERS, LLC N EW Y ORK C ITY, N EW Y ORK, U NITED S TATES

When you walk in New York City, you quickly realize that each neighborhood has a different vibe, style, and architecture. This is the beauty of Manhattan. Go ten blocks, and suddenly it’s a new experience.

The same is true with the office space. When you decide submarkets of Manhattan from an office leasing to open an office in NYC, the first thing you need to do is perspective as well as insights for each: understand that your NYC might not have anything to do with someone else’s NYC. If you are a premier hedge fund Plaza District: This is the area directly south of Central in London and you want to dip a toe into the Manhattan Park, from 3rd to 7th Avenue. This submarket features the water, you’ll probably end up in the Plaza District paying crown jewel of the Plaza District, 9 West , as somewhere between $80 — $200/SF. On the other hand, if well as the General Motors building. These are usually the you’re a hot tech company coming out of Palo Alto and two most expensive buildings in New York City. The want to be part of the up-and-coming tech scene in NYC, views of are spectacular. The firms that you probably should avoid the Plaza District and those occupy them trend toward financial services, hedge funds, steep rents. and large corporate headquarters, and rents are not for the faint of heart. between 45th and 57th is known So, when tasked with opening an office in Manhattan, the as Hedge Fund Alley, with iconic structures like the thing to realize is that the Big Apple is really many apples, Seagram’s Building, , and 450 Park among and the most important apple is clearly the one that makes the places you’re likely to bump into this year’s Masters of sense for you. So, we’ll give an overview of the key the Universe.

For more information regarding the subject of this article, please contact Bert Rosenblatt, at [email protected] or 1.212.880.3747 ext. 6619

Wall Street: The downtown end of Manhattan is the polar These are solid Class “A” buildings well absorbed by opposite of the Plaza District. Believe it or not, if you’re smaller companies. The and 450 looking for the lowest rents in Manhattan, you’ll find them Lexington are among the nicer and more expensive downtown. Wall Street, often defined as south of Fulton buildings in the area. The higher floors at 200 Park, right Street, runs from the East River to the Hudson River and is above Grand Central, feature incredible views of the rivers, home to many law firms, trading companies, and non- the Statue of Liberty, and Central Park. profit organizations. This is where one can find suitable office space, often with good water views for $25 — Penn Plaza/Times Square: If you live in New Jersey or $50/SF or about half the cost of comparable space in mid- Long Island and come into Penn Station or Port Authority, town Manhattan. A big plus for the downtown market is there are several Class “A” buildings near both transportation. Nearly every subway line runs through this transportation hubs. Without question, 1 Penn Plaza and area, proximity to is fantastic, commuter buses the new New York Times building are best in class. Rents from the outer boroughs and New Jersey stop there, and will range from $50 to $100/SF. This area was the original the new transit hub to the Freedom Tower will be “Garment Center” in NYC, and other than a handful of spectacular when it comes on-line. Class “A” buildings, these “B” and “C” buildings are home to many fashion companies, manufacturing firms, non- Union Square: When General Assembly opened its doors profits, and a variety of retailers. at 902 Broadway, it was like sticking a flag in the earth and declaring Union Square as the tech epicenter of New York Hudson Square: This area, on the of City. Tech companies large and small flock to Union Manhattan above Tribeca, has emerged as an extremely hip Square. Firms here are young, hip, and smart. Union area. Running from Canal up to Houston is an area that Square also boasts the lowest vacancy rate in Manhattan. once was home to printers who needed big, cheap Rents can be south of $30/SF in older and smaller side industrial spaces. But with the gentrification of New York, street buildings. But if you’re in better buildings on printers are now nearly extinct in this area and have been Broadway or Park Avenue South, expect to pay closer to replaced by media and high fashion companies. $40-$50 or more. Office space that you will find there will Characteristics of this building stock are high ceilings, be converted lofts and older, converted manufacturing large windows, and a cool industrial feel, and typical prices facilities. Restaurants here rock—with “beautiful” people are $35-$45/SF. You’ll find some of the hippest clubs and everywhere. restaurants in the city located here. New York City provides an exhilarating business environment not found Grand Central: If you live in Westchester County or elsewhere in America and offers a spectrum of exceptional Connecticut, you travel by Metro North and land in Grand office space choices. Therefore, it is critical to take your Central Station. Wouldn’t it be nice if your office were a time to explore the varied office space options in NYC so short walk from the train? This is why so many firms have you take the right bite of the Big Apple. set up shop between 40th Street and 45th Street and to . The buildings in and around Grand Central vary from trophy buildings to side street hovels and everything in between. There are several This article appeared in the March 2012 Issue of ITRA buildings that have direct access by tunnel to Grand Global’s Newsletter, Corporate Real Estate Strategies. Central. This means you don’t get wet or cold going from train to desk. Commuters enjoy the Lincoln Building, The Chain Building, 317 Madison, 230 Park, and the Graybar.

For more information regarding the subject of this article, please contact Bert Rosenblatt, at [email protected] or 1.212.880.3747 ext.6619 Partners — Vicus Partners Page 1 of 5

(http://vicuspartners.com)

EMAIL BERT (MAILTO:[email protected])

BERTRAM ROSENBLATT is a founding Principal of Vicus Partners, LLC, a commercial real estate firm dedicated exclusively to representing tenants in commercial transactions. Prior to forming Vicus Partners, LLC with Mr. Stein, Mr. Rosenblatt spent 8 years as one of the top producers at Schlesinger & Company, LLC. From 1997 to 1999 he worked for Newmark Knight Frank, where he was awarded the Rookie of the Year Award in 1997. He specializes in strategic planning and implementation and has completed leasing transactions totaling more than 750,000 square feet with an aggregate commitment of over $400,000,000. Some of Mr. Rosenblatt’s recent accomplishments include negotiating on behalf of General Electric Capital Aviation Services, Skanska Koch, Carnegie Mellon University, The Breeders Cup, Ruder Finn and Marathon Asset Management. Additionally, he represents an impressive roster of law firms, non-profits, hospitals and assorted private sector businesses with respect to their New York real estate. He is a graduate of the State University of New York at Purchase and is currently a member of the Real Estate Board of

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New York where he serves on the commercial board of directors ethics committee, the Young Men’s/Women’s Real Estate Association & the International Tenant Representative Alliance.

EMAIL ANDREW (MAILTO:[email protected])

ANDREW STEIN is a founding Principal of Vicus Partners, LLC, a commercial real estate Firm dedicated exclusively to representing tenants in commercial transactions. As a senior member of Vicus’s management team, Mr. Stein oversees the firm’s strategic direction as well as serving as a consultant, strategic planner and provider of specialized brokerage services to his roster of public and private sector clients. Mr. Stein’s ability to find strategic and creative solutions to both quantitative and qualitative issues makes him a valuable real estate advisor. Some of his recent accomplishments include negotiating on behalf of RW Baird, the World Lung Foundation for their U.S. headquarters in lower Manhattan, representing the Children’s Defense Fund with respect to their New York headquarters, representing multiple embassy’s, law firms, schools, non-profits and other businesses in leasing transactions throughout the five boroughs of New

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York City. He is a graduate of Brown University and is currently a member of the Young Men’s/Womens Real Estate Association & the International Tenant Representative Alliance.

EMAIL WAITE (MAILTO:[email protected])

WAITE BUCKLEY joined Vicus Partners in December 2009. Previously, he worked at Williamson Picket Gross for three years; before that, he spent six years at Schlesinger and company. At all three companies, Waite has worked as a tenant advocate in the leasing of office space. Prior to his work as a tenant representative broker, he worked on the management side of residential and commercial real estate to ten years, assisting a wide variety of cross-industry clients. Currently, Waite represents Cargill and various financial divisions including Black River Asset Management, Lacrosse Global Fund Services and Carval, all in New York City. Cargill is the second largest privately held company in the United States. He also represents a bevy of foreign entities including the consulates and embassies for the governments of Antigua and Barbuda, Estonia, Haiti and Belize. Waite attended Ohio University and New York University. He currently resides in Westchester County with his wife and three children. In his

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