Key Considerations for Renegotiating Leases During COVID-19
Equip school leaders with essential insights for renegotiating leases amid the COVID-19 crisis. Explore factors impacting negotiation positions, key levers for successful renegotiation, and strategies to navigate uncertainties effectively.
Download Presentation
Please find below an Image/Link to download the presentation.
The content on the website is provided AS IS for your information and personal use only. It may not be sold, licensed, or shared on other websites without obtaining consent from the author. If you encounter any issues during the download, it is possible that the publisher has removed the file from their server.
You are allowed to download the files provided on this website for personal or commercial use, subject to the condition that they are used lawfully. All files are the property of their respective owners.
The content on the website is provided AS IS for your information and personal use only. It may not be sold, licensed, or shared on other websites without obtaining consent from the author.
E N D
Presentation Transcript
RENEGOTIATING LEASES IN THE TIME OF COVID-19 June 24, 2020 Charter School Facility Center
OBJECTIVES Equip school leaders with key considerations involved in any COVID-19 lease re-negotiations Provide overview of key levers that could influence/support lease renegotiations Share common lease scenarios and discuss potential entry points for negotiations Q & A SB 2
TODAYS PANELISTS Lisa Desfosses Lisa Holtzmuller Sara Batterton Owner, i+c Consulting Interim CFO, Neighborhood House Charter School Former Deputy CFO and VP of Facilities and Capital Financing, Achievement First Of Counsel, Barton Gilman LLP Independent Consultant Former Acting COO/VP of Real Estate & Facilities, Uncommon Schools SB 3
RATIONAL FOR RENEGOTIATION Before considering a renegotiation, charter school tenants should evaluate their financial position AND assess the potential of their negotiation position(s). Financial Uncertainties Q s to inform your Negotiation Strategy 1. Revenue declines, including: o Budget cuts, o Enrollment declines o Donor limitations 1. Is my school/lease in good standing or is it at risk of/in default? 2. Does my school have a legal basis to renegotiate? 2. Increased expenses, including: Technology for distance learning Student supports PPE/health/sanitation costs 3. Does my school have a business/economic argument to renegotiate? 4. Have any previously negotiated construction timelines been impacted by COVID-19? 5. What other factors might strengthen my negotiation position (e.g. commitment to social/racial justice)? SB 4
FACTORS TO CONSIDER BEFORE YOU BEGIN Landlord / Property Specific Considerations Landlord relationship Landlord profile (e.g., non-profit vs. commercial) # of tenants in the facility Lease duration Lease profile (triple net vs. owner managed) Externalities/Industry Factors Business interruption insurance (coverage & status) Force majeure clauses Impossibility of performance/frustration of purpose State/local commercial rent forbearance State/local closure requirements & durations (mandates vs. voluntary closures) Escalation clauses Building/school closure clauses LH 5
KEY LEVERS TO SUPPORT RENEGOTIATION 1. Payment abatement 2. Payment reduction Key Tip: TENANTS, not just Landlords, can also offer RENTAL CONCESSIONS to support successful negotiation outcomes. 3. Payment deferral 4. Combination of the above 5. Collaboration to reduce property expenses 6. Property tax abatement LH 6
COMMON SCENARIOS & POTENTIAL APPROACHES (1) Rent tied to annual PPF; charter expecting decrease in per pupil aid (2) Rent with pre-determined built-in annual escalation; PPF is either uncertain or expected to decline (3) Rent with escalations based on CPI or other related indices (annual or periodic) (4) Rent to developer with lease buyout window approaching (5) Common Area Maintenance (CAM) shared among multiple tenants and/or directly paid to Landlord Landlords should be incentivized to make small concessions in lieu of having vacant property. LD 7
MAKING THE APPROACH (1) Know your landlord (e.g., what is their profile? what motivates them?) (2) Know where you want to land (both ideal & acceptable solutions) and why (3) Prepare documentation & evidence (e.g., relevant sections of the lease, state orders, etc.) (4) Recognize that commercial landlords are nervous and feel on edge right now (5) Position your ask in a long-term context (e.g. we re here to stay but need some short term help ) (6) Know what you are asking for and where you can make concessions (7) Be aware of any notice provisions that may impact your timing/approach LD 8
QUESTIONS & ANSWERS Please use the Q&A box Find a recording of this webinar and sign up for our monthly newsletter: www.facilitycenter.publiccharters.org Join our LinkedIn group: Public Charter School Facilities Email us suggestions: mark@publiccharters.org Contact the panelists: Sara Batterton: sara.batterton@gmail.com Lisa Desfosses: lisa@ipluscconsulting.com Lisa Holtzmuller: lholtzmuller@bglaw.com THANK YOU FOR WATCHING SB 9
