Presented By Mark Rauch
“The great leaders are like the best conductors-they reach beyond the notes to reach the magic in the players”.
-Blaine Lee-
Most commercial office Lease transactions involve some sort of interior Tenant Improvement (“TI”) construction. The project can be as minor as installing new paint and carpet to spruce up a tired space, or as extensive as a full office build-out from a “shell condition”. Unless a space is specifically offered “as-is”, Landlords typically provide some sort of TI Allowance – usually dollars/Rentable Square Feet (“RSF”) – as part of the Lease package offered to prospective Tenants.
Distinctions
In other cases, a corporate real estate tenant may negotiate, as one of its key Lease terms, that a Landlord provide the Tenant with a “Turnkey” Build-Out of the Tenant’s desired interior layout. With this type of agreement, the Landlord pays the full costs of the architectural and engineering services, construction, construction management and any required permits or fees. The costs of the TI construction are incorporated into the agreed Lease rate and the Tenant has no direct costs for this construction. The Landlord assumes the management responsibility for the project and, except for Tenant caused delays, assumes the schedule risk for the project. The Tenant is essentially handed the keys to its new space when the construction is complete.
The Process
With a Turnkey Build-Out, the process often begins with an interior architect working with the Landlord and Tenant to create a Pricing Plan. A Pricing Plan will show the Tenant’s required build-out (walls, doors, millwork, etc.) and will contain keyed notes providing details about finishes (paint, carpet, counter surfaces), electrical issues (lighting, outlets, dedicated circuits), notes on the plumbing required for break rooms or coffee bars, and numerous miscellaneous notes required for the proposed construction. If the Landlord approves the Pricing Plan, it is provided to several general contractors experienced with office TI construction to obtain preliminary pricing for the proposed TI Construction.
If the preliminary prices are acceptable, things can move forward. However, if the preliminary prices are too high, the Landlord may refuse to cover the full costs. At this point, the Tenant may: continue to negotiate or walk away from the deal; modify its plans to lower the costs; or agree to pay some portion of the costs, either as a cash payment of through higher rent payments. If an agreement is reached, the Landlord will authorize the architect to prepare detailed Construction Drawings.
Ensuring Good Results
The key for both the Landlord and Tenant is developing plans that clearly identify what will be built and delivered to the Tenant. Misunderstandings over this process are usually avoided with detailed plans, good communication between all parties involved in the negotiation and design process and strong oversight of the general contractor by the Landlord.
Nothing contained herein is to be considered legal advice. Always seek legal advice when evaluating any legal document.
I also wanted to reiterate that I am requesting meetings with Professional and Corporate Office Tenants. I am looking to represent a handful of Tenants, at any given time, each occupying 5,000 rentable square feet to 500,000 rentable square feet. Please call or email me to schedule a time to discuss how I can help
Other than representing you, a referral is the greatest compliment I can receive.
My focused specialty is solely driven to advocate the office space interests of Southern California-based corporations and professional services firms in leasing and purchasing negotiations of all types-renewals, relocations, renegotiations, recasting, subleasing, terminations and investments on a local, regional, national and international basis through a network of offices in 200+ markets around the world. Assignments range from single office lease transactions to national and multi-national real estate portfolios.
It is my sincere desire to develop meaningful, long term relationships as your trusted Tenant Rep Consultant and friend.
Regards,
Mark
Mark David Rauch
Senior Vice President
License # 01019455
Direct: 213-430-2469
Mobile: 818-943-2959
http://www.linkedin.com/in/markrauch
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