Real Estate Advisor Law Blog

Real Estate Advisor Law Blog

In Search of Restaurant Lease Knowledge and the World’s Greatest Fish Taco

Posted in Leasing Issues

IMG_2384I just got back from San Diego where I spoke at the National Restaurant Association Financial Officers and Tax Executives Conference. I was on a panel with Ron Dee of Cooper’s Hawk Winery & Restaurants and George Galloway of Next Realty Mid-Atlantic. Although I was a speaker there, I always try to take advantage of learning a thing or two for myself at these kind of seminars, as well as develop relationships with clients and potential clients. By that measure, it was a successful trip.

  1. I learned from George Galloway that savvy tenants have gotten real smart at how to reject delivery of possession and thereby obtain penalty payments, and that savvy landlords have gotten real smart at how to avoid paying allowance installments.
  2. I enjoyed an amazing dinner at Eddie V’s in LaJolla overlooking the ocean with Harvey Metro of Matchbox Food Group and Ron Dee and RD Ahlers of Cooper’s Hawk.
  3. I met Suzie Pfeiffer, Vice President of Finance of LaRosa’s. I had to go all the way to San Diego to meet her. I’m an east coast pizza guy, but have to say I love LaRosa’s.
  4. I learned from Ron Dee that landlords are highly motivated to provide an allowance in every deal, but at the same time highly motivated to not actually pay it.
  5. I learned that Steiner + Associates is a great landlord. Steiner’s lease is, relatively speaking, extremely reasonable and easy to read, and they are much more willing to agree to reasonable changes requested by a tenant.
  6. I had maybe the best fish taco in the world. And I got it from a food truck. Marisco’s German Beyer. I have no idea what that means or what is German about it, but I have now ended my search for the world’s greatest fish taco. They have a shrimp taco called the Gobernator which was pretty damn good too.
  7. We discussed that restaurants may be the new anchors in today’s lifestyle centers. A center has to provide an “experience” to motivate consumers to visit the center as opposed to sitting home and buying over the internet. Restaurants help create that experience.

What Happens in Vegas…May End Up in a Blog

Posted in Uncategorized

Kadish_CMYKThe ICSC Walapalooza starts this weekend in Vegas. The sheer number of people converging in one place and the talent level of them is staggering. And of course it is all hard work! I’m hoping to get a couple free minutes to meet with some of my favorite clients:

Steiner + Associates – and their new Liberty Center. Anne Mastin has done an amazing job for this Center scheduled to open October 8. She is always a couple steps ahead of me. Steve Hardy is a very entertaining leasing agent and he does great work. Add Scott Fox and Jody House to the mix and work ends up being fun.

Metropica – and their new center in Sunrise, Florida. Just got a flurry of leases signed on the eve of Vegas. Sandie Witmer worked overtime. Sandie may be one of the nicest people I have ever met. And under the stress of getting the leases done in time, she was able to remain nice (a nice counterbalance to me).

Cooper’s Hawk Restaurants – several new locations. They have pretty good wine, and I admit I am a wine snob. And Ron Dee will fool you – he is quietly very funny.

Jo-Ann Stores – long-time client. Kevin Beegle has done a boat load of leases for them. Tony Carosello will break your legs if you don’t cave on lease issues. Not sure if Matt Senra will come with them, but get this – I saw Matt Senra eat blood marrow. Not even kidding.

Core Resources – my oldest, very first, client. Paul Kitzmiller has been a client and friend since 1987 – unbelievably talented guy. David Kitzmiller may be the most solid guy I know. (They bought me a filet mignon dinner at the Bellagio last year just so I would say nice things about them.)

Tilted Kilt – Sean Cahill. Fun concept with explosive growth. This should be a fun engagement.

Matchbox – a relatively new client. Just met Harvey Metro and Peter D’Amelio at their first location in Washington D.C. Great concept- great guys.

New City – new urban center in Chicago. Very cool project. Great line up of tenants in a great location. It has been fun to work with Marci Carl and grand opening in Chi town will be a blast.

I am looking forward to seeing all of these folks, plus numerous other friends.

What I Learned Today

Posted in Leasing Issues

Washington MonumentI just attended the Advanced Commercial Lease Institute at Georgetown University Law Center. The Institute “brings together the brightest minds in the commercial leasing industry” to discuss “the most up-to-date and pressing subjects faced by commercial leasing attorneys.” Attendance is by invitation only and limited to those with at least 10 years of leasing experience. I was invited by no less than Joe Conn. Not sure if he was drinking when he decided I would qualify for the Institute, or if he’s on commission, but I appreciated the invitation nonetheless. This is what I learned at the conference:

  1. Mark Senn led a great discussion where I learned you should never use “and/or” in a lease; confirmed my idiosyncrasy that you should not use both the spelled out versions of numbers together with the numerical presentation; found that attorneys can take plain sentences and turn them into meanings no client ever even envisioned let alone intended; and realized that business clients would be mortified to find out how fascinated leasing attorneys can be with the possible interpretations of clear, mundane lease provisions.
  2. Microsoft Surface is a way better alternative to and can be a single replacement for both your iPad and laptop. Got my IT guys on that immediately.
  3. I listened to a great presentation on cap rates and net present value analysis, and learned that I should call someone else if I need to calculate Internal Rate of Return. (Although, really, would I ever truly “need” to participate in a discussion about IRR in the first place? Please say no.)
  4. Joe Conn is a great host and a really good attorney.
  5. A lease provision where Landlord or Tenant installs solar panels for electricity is the “cutting edge” of leasing.
  6. I learned, or at least was exposed to, ethics. But we learned about lying clients instead of lying attorneys so at least there was that.
  7. I met opposing counsel with whom I just started a new lease. Based on his first draft, I was not liking him at all. Come to find out he was thinking the same thing about me based on my response. I ended up liking him and thinking he was a good guy. I joked around with him in the hope that he would be more receptive to my revisions. However, my wife reminds me that my jokes are usually not very funny to anyone other than me. Just hoping I didn’t do more harm than good.
  8. I decided it might be good practice to review all my form leases to verify the various interdependent clauses are consistent. So far so good – I haven’t found anything in need of change, but I’m still looking.
  9. I confirmed that I really do like leasing. So all in all it was a pretty successful conference.

Project Parklet

Posted in Development Issues, Environmental Issues, New Urbanism

At the recent Accelerate 2015 (Cleveland Leadership Center) awards (http://www.cleveleads.org/AccelerateNEO/pitch-presenters), Cleveland natives and returnees, Whitney Hallock and Caroline Wagner, presented the idea for Project Parklet to transform the Cleveland area streetscape. Speaking on NPR, the ladies mentioned they took their inspiration from the urban parklets in Los Angeles and Washington, D.C.. Parklets break up the urban landscape and provide a landing pad for shoppers and pedestrians and offer a unique place to stop, site, chat, eat or meet. They have sprouted around the U.S. in cities like Phoenix, Philadelphia, Oakland, Los Angeles, San Jose, Dallas, Seattle, and San Diego.

Parklets are simply mini-parks, often privately owned on moveable base and feature bold and natural designs. The beauty is to repurpose extra or unused parking spaces flush with the sidewalk with eye of serving the pedestrian or biking public. Also known as “temporary sidewalk extensions” http://pavementtoparks.sfplanning.org/parklets.html, parklets feature attractive seating and landscaping and act as a mini-oasis in the city.

The main challenges, much like our work on the conversion of East 4th several years ago to a pedestrian only street http://www.east4thstreet.com, is getting a city comfortable to relax zoning requirements and embrace how streets are changing in the city center. The demand for parking spaces must be balanced with the growing walking public and the desire of those consumers for outdoor space.  Maintenance, traffic control and safety and movability for street maintenance and snow removal are reasonable concerns. Many parklet designs respond to the safety issues with fencing, decking and railings that read more like sculpture than garden railing. Businesses are sponsoring parklets in front of its restaurants or shops as a way to attract more business and keep shoppers and diners engaged while waiting for friends or for a table. Coming soon to a café near you – sure, we can wait 20 minutes for a table.

Below is a video which describes the creation of a Parklet in Portland, Oregon. The comments in the video apply to communities everywhere.

Supreme Court Of Ohio Rules That Municipal Ordinances Related To Oil And Gas Are Preempted By State Law

Posted in Uncategorized

On FAltier Brett_Background_CMYKebruary 17, 2015, the Supreme Court of Ohio ruled that certain oil and gas-related ordinances of the city of Munroe Falls are preempted by state law. State ex rel. Morrison v. Beck Energy Corp., 2015-Ohio-485 (Read the opinion here). In this case, Beck Energy obtained a permit from the Ohio Department of Natural Resources (“ODNR”) to drill an oil and gas well within the city of Munroe Falls. Beck Energy, however, did not comply with Munroe Falls’ ordinances specifically regulating oil and gas drilling, including requiring a local zoning certificate (which included a one-year waiting period before drilling could begin), fees, performance bonds, and a public hearing. The City sought and was granted an injuction by the trial court. Beck Energy appealed on the basis that the local ordinances were in conflict with the state statutory scheme set forth in R.C. 1509, which granted ODNR the “sole and exclusive authority to regulate the permitting, location, and spacing of oil and gas wells and production operations.” After the 9th District Court of Appeals held that the City’s ordinances conflicted with state law and ODNR had exclusive jurisdiction, the issue before the Ohio Supreme Court was whether Munroe Falls’ ordinances were a valid exercise of the City’s power under the Home Rule Amendment to the Ohio Constitution.

Under “Home Rule”, municipalities have authority “to exercise all powers of local self-government and to adopt and enforce within their limits such local police, sanitary and other similar regulations, as are not in conflict with general laws.” While a municipality’s police power is broad, a municipal ordinance cannot conflict with “general laws” of the state. To determine whether there was a conflict between Munroe Falls’ ordinances and R.C. 1509, the Ohio Supreme Court applied a three-step conflict analysis to determine whether: (1) the ordinance is an exercise of the police power; (2) the state statute is a general law; and (3) the ordinance conflicts with the statute. The Court concluded that the ordinances were an exercise of police power and that R.C. 1509.02 was a general law. As to whether there was an actual conflict, the Court determined that the ordinances prohibited oil and gas drilling without local approval. But, state law specifically allows for the drilling of a well if a permit is issued by ODNR. Further, R.C. 1509.02 explicitly reserves for the state, to the exclusion of local governments, the right to regulate “all aspects” of oil and gas operations. In the end, the Ohio Supreme Court held that the Home Rule Amendment to the Ohio Constitution does not allow a municipality to “discriminate against, unfairly impede, or obstruct oil and gas activities and production operations that the state has permitted under R.C. Chapter 1509.” As such, Munroe Falls’ oil and gas related-ordinances were in conflict and, therefore, preempted by state law.

Significantly, the Court limited its holding to the ordinances at issue in this case, and as such, was not as sweeping as recent decisions by the high courts of New York and Pennsylvania. Additionally, the Court potentially allowed room for a future challenge by municipalities to regulate oil and gas within its borders by using its zoning powers under the Home Rule Amendment. Justice O’Donnell in his concurring opinion explains that “[n]othing in R.C. Chapter 1509 expressly addresses zoning or requires ODNR to regulate the location of oil and gas wells to ensure compatibility with local land use, preserve property values, effectuate a municipality’s long-term plan for development, or uphold any of the other traditional goals of zoning.” Consequently, while this decision was a win for state regulators and oil and gas production companies, the battle between local and state regulation of oil and gas will likely continue both in Ohio and nationally.

Not Just My Kids Who Need (Want) Larger Allowance

Posted in Leasing Issues, Uncategorized

Glass jar full of money with a white allowance labelThe new IRS repair regulations can impact how tenant allowances are structured.

Traditionally, landlord and tenants have relied on the Section 110 safe harbor so that provided the allowance is spent on leasehold improvements, the allowance is not taxable to the tenant and the landlord depreciates the leasehold improvements over 39 years.

Under the repair regulations, the landlord may get to expense, rather than depreciate over 39 years, certain improvements if it can meet certain conditions. Note that a landlord can deduct larger expense items if the landlord has audited financials. In order for the repair regulations to apply, the tenant allowance should be structured to fall outside the Section 110 safe harbor. However, the allowance will still not be taxable to the tenant as long as the landlord owns the property and the tenant only uses the allowance for leasehold improvements and qualifying related costs.

The repair regulations may be helpful for larger landlords without hurting tenants. It is worthy of note because it is rare that regulations are ever adopted where one side is helped without a corresponding cost to the other.

And while you are thinking about the tax treatment of an allowance, it may be helpful to remind tenants that any portion of the allowance not spent on leasehold improvements and qualifying related costs which will be owned by the tenant is taxable to the tenant in the year received. So, in a ground lease situation where the tenant builds the building and the costs are paid for by the allowance, the landlord must own the building and get the depreciation (or deduction under the repair regulations, if applicable) or else the allowance will be taxable to the tenant. The repair regulations do not change the treatment of the allowance for the tenant.

Hot or Not?

Posted in Uncategorized

fire active

 The future of Radio Shack appears to be in jeopardy. The news got me thinking about the hot retailers to target as replacements, or just to target as draws for your center.

  1. Apple store.  No duh. Every Apple store is incredibly successful. They generate large sales because they have great products and provide a great retail experience for the customer. And this is not just a fad. Apple is probably here for a while.
  2. Health Food Restaurants.  Restaurants are now key components for any vibrant center and the health food category is relatively new with few players, and under-represented in most centers. True Food Kitchen, LYFE Kitchen and Northstar Café are great draws and great restaurants.
  3. Lululemon.  My kids love their clothing, and they don’t even Yoga. Lululemon goes well when paired with health food restaurants too.
  4. Beer and Wine.  Bars and restaurants specializing in a large variety of craft beers, are great draws – think Yardhouse and Pies & Pints. Life is too short to drink cheap beer. (Although I will admit that Miller High Life is my house brand.) Beer is not just for breakfast any more. You get the idea. Along the same lines, wine bars and wineries are great attractions – think Cooper’s Hawk. Man can not live by beer alone.
  5. Nordstrom.  Department stores are less ubiquitous than in the past, but having a  Nordstrom in your center is a huge win. Nordstrom is a very definite draw and provides a great retail experience for its customers.
  6. Anthropologie.  Scott Fox of Steiner + Associates says his kids love this store, even if they can’t afford to buy anything there.  Anthropologie is a draw: it attracts both shoppers and other retailers who want to be in the same centers.  And more often than not Scott is buying his kids the stuff they can’t afford.
  7. Fast Casual.  Big growth in this segment. Chipotle, Piada, Fusion, and Noodles & Co. are examples and they are always busy.
  8. Amazon.  You can buy anything on Amazon, and you can get it cheaper than anywhere else. I just have a suspicion that Amazon will branch out to have brick and mortar locations very soon. Given their performance in internet sales, you would have to think they would succeed with retail stores too.

 These are just a few that came to mind. Put these in your center, and at least you will get me to come.

Potential Changes Coming to the Ohio Condominium Act

Posted in Condominiums, Legislative Update
Denice Hertlein, CPA Clark Schaefer Hackett

Denice Hertlein, CPA
Clark Schaefer Hackett

Thank you to our friend Denice Hertlein of Clark Schaefer Hackett for insightful comments relating to Ohio House Bill 371 which has the potential to place more requirements on condomninium associations and their officers and managers. Being volunter organizations, House Bill 371 has the potential to deter active participation by owners in condomiminium associations by requiring new record keeping and procedural requirements on associations. While lawyers generally love more regualtion and procedural requirements, I am not sure that the issues House Bill 371 is intended to address are so pervasive that additional legislation is necessary. If you live in, manage, develop or finance condominiums you are advised to follow House Bill 371 and speak with your state representatives.

Hospitality

Posted in Hospitality, Hospitality Industry Issues, Retail Industry Issues
Brad Kaplan  Hospitality Industry Practice Contact

Brad Kaplan
Hospitality Industry Practice Contact

After many years of serving the hospitality industry in various capacities, we have brought all of our skills and experiences under one roof as we have formalized our Hospitality Industry practice to serve the growing needs of our hospitality industry clients. The hospitality industry defines “client service.” We work with our hospitality clients – hotel, restaurant, entertainment and gaming, among others in all aspects of their businesses. Visit our website for more information or look for one of our Hospitality lawyers at any of the many industry conferences we attend, including The Lodging Conference and the ALIS Conference.

O-H-I-O

Posted in Uncategorized

iStock_000007849551SmallNow that The Ohio State Buckeyes have won the National Championship and proven that we in Ohio ARE the best in college football, it made me think about what else we do great in Ohio:

  1. We are the Mother of Presidents. More of our country’s presidents come from Ohio than any other state. William Henry Harrison, Ulysses Grant, Rutherford Hayes, James Garfield, Benjamin Harrison, William McKinley, William H. Taft, and Warren Harding – eight in all.
  2. We make great beer. Great Lakes Brewing Company, Mad Tree Brewing Company, Rhinegeist Brewery, Christian Moerlein, Thirsty Dog Brewing Company, Hoppin Frog Brewery and Jackie-O’s are some great Ohio-brewed beers I have tasted (ok, I know, I never just taste beer). We also are home to Hudy Light and Little Kings, and no other state can say that!
  3. An inordinate number of great businesses are headquartered here. Macy’s, Procter & Gamble, Kahn’s, Kroger, IMG, Wendy’s, the Limited, Nationwide Insurance, Jo-Ann Stores, Goodyear, Owens Corning, among others. All important multi-national business. All headquartered in Ohio.
  4. We have the greatest coaches. Urban Meyer, Bobby Knight, Chuck Noll, the Harbaugh brothers (even if one of them now coaches at that school up north), Don Shula, Jon Gruden, Ara Parseghian, Don Zimmer, Branch Rickey – just to name a few – all from Ohio. Clearly, if you want to be a great coach someday, you better move to Ohio quick.
  5. We have truly great restaurants. Boca in Cincinnati may be as good a restaurant as any you will find anywhere in America. And any one of Cameron Mitchell’s restaurants in Columbus will be awesome. (The Pearl may be my favorite – besides incredible food they serve little Miller High Lifes with their Bloody Mary.) In Cleveland, I like Lola and Fahrenheit, but there are obviously a number of other world-class restaurants. And don’t forget the world famous Pine Club in Dayton. On a per capita basis, we have more great restaurants in Ohio than anywhere else.
  6. Professional sports is practically centered in Ohio. The Pro Football Hall of Fame is in Ohio, the first professional night baseball game was played in Ohio, the Big Red Machine was the best pro baseball team in history, and of course Paul Brown, the father of professional football, and Lebron James, the greatest basketball player ever, are from Ohio.
  7. We have the largest mound. The Miamisburg Indian Mound, is a perfect cone shaped mound. At 65 feet high, it is the largest in the United States. So we got that going for us.
  8. We are home base for Ulmer & Berne. One of the greatest law firms in the entire world has headquarters in Cleveland with offices in Cincinnati and Columbus (and Chicago, Illinois –our Ohio qualities must have rubbed off there because our Chicago office is really good too).

I know there are a number of other things great about Ohio. But you had to be proud of Urban Meyer and the Buckeyes. Incredible performance and incredible achievement.

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