Leasing

Manatt represents landlords and tenants in the leasing of commercial space and unimproved land. We have successfully negotiated and drafted every form of lease for a broad range of clients, including shopping malls and big-box retailers, office and professional buildings, manufacturing facilities and industrial warehouses, restaurants and movie theaters, and agricultural and farmland.

Commercial Space Leases
Our attorneys draft, negotiate and document lease agreements as well as complicated work letters for tenant improvements; guarantees and supporting letters of credit; recognition/subordination, nondisturbance and attornment agreements; subleases and assignments; early-termination provisions; extension and modification agreements; workout agreements, including rent reductions; amendments; common area concession agreements, and estoppel certificates.

• Big-Name Retailers. As leasing counsel for developers of malls, mixed-use developments that include a retail use, and stand-alone retail establishments, we have sat across the table from national retail chains such as Rite Aid, Trader Joe's and Home Depot. On the leaseholder side, we have negotiated leases that meet the unique needs of our clients, whether a global discount chain or highly successful family-owned business.
• Shopping Centers. Shopping center leases have been a cornerstone of our leasing practice for many years, so we are extremely knowledgeable about the leasing issues unique to regional and super-regional malls, outlet centers and neighborhood shopping plazas and strips. Our representation of a major REIT in the acquisition and redevelopment of the largest regional shopping mall in California involved structuring or restructuring dozens of leases, negotiating and drafting reciprocal easement and reserved parking agreements, and countless other leasing-related matters.
• Build-to-Suits and Build-Outs. We have substantial experience structuring lease transactions in which the landlord builds the entire premises for the tenant, then sets the rent based on the market plus construction and financing costs. We negotiate provisions concerning the preparation of improvement plans, cost estimates, final pricing, tenant improvements, change orders, building shell costs, landlord overhead and profit, punch list items and parking lot improvements. We have also negotiated complex build-outs for a variety of uses, ranging from office space in a high-rise tower to a restaurant in a landmark building.

Ground Leases
For decades we have negotiated and structured long-term leases of unimproved or previously developed property that allow for improvement by the tenant.  A potential win-win situation, the tenant can begin development without purchasing the land and the landlord avoids the costs and risks associated with development. The tenant can also deduct the ground rent and depreciate improvements while the landlord's ownership of the improvements at the end of the lease term increases the property's resale value. There are risks, however, that must be identified through due diligence and mitigated through negotiation. Whatever the potential issue-length of term, renewal options, title insurance, leasehold enforcement, rent, limitations on use, construction and maintenance, equity sharing at resale, assigning and subletting, damage and destruction, default conditions and termination, surrender and reversionary interests-our lawyers help you prioritize revenues and risks so negotiations don't get bogged down in unimportant issues.

• Medical/Professional Buildings. We have particular experience in the structuring of ground leases for medical office buildings. For example, we represented a national healthcare provider as the fee owner in numerous leasing transactions involving sites in the western United States, negotiating not only the ground leases but also the standard-form medical office leases, parking lot leases, management agreements and related cross-easement and license agreements.
• Colleges and Universities. Manatt has represented many colleges and universities in negotiating ground leases allowing for construction of single-family detached homes, planned unit developments and condominiums to serve as faculty housing, as well as the creation of campus environments that may include hotels, technology parks, dormitories, athletic facilities and other structures.
• Government Landlords. Our work for government clients includes preparing ground leases of historic sites and unusual properties, such as a former military base from the National Park Service. The agreement we drafted was adopted as a template by the park service and other federal agencies.
• High-Profile Projects. In California, we have become a go-to ground leasing firm for high-profile projects such as the Willis Annenberg Center for Performing Arts, located on the site of the historic Beverly Hills Post Office, and the renowned Festival of the Arts outdoor amphitheater in Laguna Beach, California.

Sale-Leasebacks
Manatt has extensive experience structuring sale-leasebacks, allowing companies with equity in commercial real estate to sell properties to companies that focus on buying and managing property, then enter into long-term leases at rental rates based on the new owner's financing costs, the lessee's credit rating and a market rate of return.

If you are the seller-lessee, the transaction can free up capital to pay down debt or invest in new opportunities, provide "quick money" in a tight capital market or improve a balance sheet by replacing a fixed asset with a current one, while continuing possession and use of the property. If not properly structured, however, the IRS could view the transaction as a mortgage, resulting in adverse tax consequences. Manatt helps you avoid this scenario by working to ensure that purchase price, lease payments and option to repurchase are fair market value, that nothing in the lease prevents the new landlord from selling, mortgaging or assigning his interest or benefitting from the property's appreciation, and that the agreement states reasons for the transaction sufficient to rebut a claim of tax avoidance.

Benefits if you are the buyer-lessor include the security of a built-in tenant, a higher return rate than in a loan arrangement subject to usury laws, protection from market downturns provided by its extended term, and ease in handling a default (termination and eviction). Through careful negotiation and drafting, our lawyers help you avoid risks, such as the failure of the seller-lessee to pay property taxes on time, challenge tax assessments when appropriate or maintain insurance coverage.