Finding Your Way Around the Letter of Intent, the Letter of Credit, and the SNDA

Agenda

Introduction

• What Ties These Three Documents Together?
• Contract Terms, Credit Support, and Priority

Letters of Intent

• Purpose and Timing
• Meeting of the Minds
• Allows a Tenant to Compare Deals Side by Side and Allows the Landlord to Begin Financial Modeling
• Provides Direction to Legal Counsel
• Sets Tone for Negotiations and Guides Business Teams on Unique or NonStandard Terms
• Binding Versus Non-Binding
• Review NonBinding Language and Importance of Maintaining Optionality
• Review Case Law and Lessons Learned From Bad Drafting
• Key Terms to Include in a Letter of Intent
• Name of Tenant, Rent, Term, Condition of Premises Upon Delivery and Buildout Obligations/Allowances, PassThrough Charges Net, Gross, Hybrid
• Letter of Credit, Guaranty, and SNDA
• Review Other Terms to Consider Including
• Retail, Industrial, and Other Unique Properties
• Lessons Learned From COVID-19
• Insurance Provision Updates/Increased Coverage
• Address Governmental Restrictions to Access
• Rent Abatement Structures Create a Formula
• Delays in Delivery/Commencement Date Impact
• Broker Disclosures
• State Required Disclosures
• Dual Agency
• Disclosure That Brokers Are Not Experts in Various Areas Requiring Consultants

Letters of Credit

• What Is a Letter of Credit?
• An Irrevocable Contract That Is Strictly Construed Based on Its Written Terms and Governed by Certain Industry Developed Protocols and a Stated Jurisdiction's Laws
• Understanding the Terms: Applicant, Issuer, Beneficiary
• UPC 600 and ISP98, and Interaction With the UCC
• Selecting a Controlling Jurisdiction in the Event of Conflict
• What Does a Letter of Credit Say?
• Essential Terms
• Fixed Term and Evergreen Provisions
• What Is Required to Draw Upon a Letter of Credit?
• Advantages and Disadvantages of Using a Letter of Credit
• For Landlord Bankruptcy Protection vs. Defective Presentation
• For Tenant Preserve Use of Funds vs. Cost and Annual Compliance
• Qualifying the Issuing Bank
• Reductions and Renewals
• Pitfalls of Automatic Reductions
• Bank Charges for Transfers and Other Actions

Subordination Non-Disturbance and Attornment (SNDA)

• The Agreement Establishes the Legal Priority and Rights Between the Landlord's Lender and the Tenant If the Landlord Defaults Under the Stated Loan
• As the Name Applies, the Agreement Deals With Three Contractual Commitments: Subordination, Non-Disturbance, and Attornment
• Why Is Document Needed?
• Often, SNDA Also Includes Covenant of Tenant to Pay Rent to Lender Upon Notice of Landlords Default Under Loan
• Key Provisions for a Lender
• Lender NonLiability/Exculpation for Prior Landlord Default
• Lender Right to Insurance Proceeds and Condemnation Award
• Amendments to the Lease Without Lender's Consent (but See Below)
• Lender Cure Rights (but See Below)
• Key Provisions for a Tenant
• Amendments to the Lease Without Lender's Consent
• Lender Cure Rights (Setting an Outside Date)
• Assignment and Subletting Provisions of the Lease Control
• Conditioning NonDisturbance on No Default Under the Lease
• Consider Improvement Allowances and MidTerm Concessions
• Review Case Law
• Record or Not to Record
• Timing of Delivery and Lender Charges - What to Say in the Lease
• Relationship to Sublease Recognition Agreement

Credits

Faculty

Margaret R. Duskin, LEED GA

Cushman & Wakefield of California, Inc.

• Executive Director with Cushman & Wakefield in San Francisco, one of the world’s key office property markets
• Was recruited to Cushman & Wakefield in 1998, from the Ernst & Young Real Estate Consulting Group
• Recognized as a market leader in office leasing and sales
• Sold or leased over 10 million square feet of office and retail property
• Real estate career includes commercial property brokerage, corporate consulting, and advisory services
• President of a regional brokerage firm (eight offices in Northern California)
• With this diverse experience, works with clients on a higher level of business challenges and creative solutions; applies an insightful, consultative approach based on real-life acumen
• Understands management goals, budgets, HR, and governance issues
• Specializes in complex deal structures, advanced lease negotiations, and corporate strategic planning
• Known for expert communication skills, achieving client’s commercial property goals through visioning, strategic planning and financial analyses, and teamwork
• Focus is tenants, particularly law firms; venture capital and advisory; corporate clients, plus health care
• Investment experience is extensive and varied
• Experienced as 15+ years of landlord representation
• Sophisticated knowledge of what buyers/owners/ landlords want to achieve in cap values, ROI’s and leasing

Manuel Fishman, Esq.

Buchalter Nemer

• Shareholder with Buchalter Nemer
• Focuses practice on representing real estate developers and owners in the acquisition, sale, and financing of commercial properties
• Active leasing practice representing owners of several major office buildings in San Francisco, including the Transamerica Pyramid, as well as tenants in lease and sublease transactions
• Expertise includes letters of intent, tenant improvement work agreements, security deposits/letters of credit, signage rights, expansion and contraction rights, permitted transfers, operating expense audits, and lender and master landlord recognition agreements and extensive experience in the area of ground leasing and retail leasing
• Leading attorney in the area of landline and wireless communications and Internet-based services in commercial properties and rooftop installations
• 2020 Best Lawyer in America in real estate law, an honor he has received since 2007; 2014 Top Rated Lawyer by American Lawyer Media, 2012-2018; one of Bay Area Magazine’s Top Lawyers in the Bay Area; and recipient of the 2019 Raymond C. Nann Distinguished Service Award
• Frequent lecturer on office and shopping center leasing matters and frequently writes for industry newsletters
• J.D. degree, magna cum laude, Santa Clara University School of Law; B.A. degree, State University of New York at Purchase
• Can be contacted at [email protected] or 415-227-3504