Real Estate and Leasing Tips for Emerging Companies

1. Real Estate and Leasing Tips for Emerging Companies Chip Leyens Shareholder Baker Donelson 504.566.8628 jleyens@bakerdonelson.com

2. Some Basics • Why buy when you can rent • Permits (recommended) & Zoning (check it) • IT issues – don’t get stuck with a fax-modem • Take it for a test drive – try a sublease or shared space arrangement

3. Sublease: Kind of like a starter home • Good way to get your foot in the door and not pay a lot • Sublease rates generally are less than direct lease rates • Do not put any of your $ into sublease space because if your sub-landlord defaults, you are out • Have to figure out space and service allocation, as well as access • In a soft market, sublease space is available and subleases can lead to direct leases with landlord

4. Not just location, location, location • Negotiate ability to take on additional space and get out early if you need to • Short initial term with good expansion,renewal and termination options • Flexibility, flexibility, flexibility

5. Expansion options: Lots of ways to structure • “Hard” expansion option identifies specific space at a specific rate • “Floating” expansion option identifies a certain amount of space in various potential locations within a building • Right of first offer • Right of first refusal • Notice of availability of space • Be a good tenant

6. Renewal options: • Setting renewal rent up-front vs. determining it at a later time (kind of like fixed v. variable interest rate) • Don’t get hung up by landlord renewal language re: no defaults

7. Termination options: • Try to limit payment to reimbursement of landlord’s unamortized up-front costs (commissions and tenant improvement allowance) over initial term of the lease

8. Pricing • Try to get a cap on variable costs in the lease or a gross lease (gross v. net lease)

9. Build-out work: • If you are getting work done in the space, try to get the landlord to do it (unless you’re a contractor)

10. Tenant allowances = landlord financing of improvements • It usually gets paid back by tenant over time as part of base rent • Depending on market, no free lunch

11. Get a broker who knows the market: • Don’t rely on the landlord’s broker (or on your lawyer to work the numbers) • Start early with a good local broker who knows the market • Make sure broker has experience for applicable type of space: e.g., office, retail, warehouse, medical and/or flex space

12. Legal issues: • Clearly drafted lease that identifies each party’s respective maintenance, payment and other obligations • No gotcha clauses that will give landlord undue leverage (e.g. rent acceleration) • Insurance and indemnity issues in leases are usually the most difficult

13. Want LEED certified space? Tell your broker! • Different types and levels of LEED certification • LEED building does not necessarily mean cost savings on rent (but there could be other benefits)

14. Assignment: • Make sure it’s broad enough to permit change in control, sale/merger, etc., without landlord’s prior consent

15. Guaranty: • If you have to give one, try to include a burn-down provision in it

16. Flexibility • Should include parking and operating hours - don’t get jammed on after-hours HVAC

17. Questions