ODOD Announces Start of "Making Efficiency Work" Funding

Posted on March 30, 2010 by John Weber

The Ohio Department of Development has announced the availability of $8,000,000 in grant funding for qualifying energy efficiency projects undertaken at existing multi-family, commercial, and institutional buildings. The goal of the program is to encourage the installation of energy efficiency equipment that will measurably improve the energy efficiency of existing multi-family, commercial, and institutional buildings. The program is competitive, and awards will range from $125,000 to $1,000,000 per project. The funds available under this program were originally allocated to Ohio under the American Recovery and Reinvestment Act of 2009. 

Individuals and businesses within Ohio may apply for funding, although government agencies, individual residential building owners and schools are generally not eligible.  Applicants must have match funding equal to at least 50% of the total project cost. Additionally, projects should demonstrate job creation or retention through: (1) retrofit or installation hours; (2) new jobs directly created through the project; or (3) retention of existing jobs at the site. 

 

Funds may be used on energy efficiency improvements such as:

 

·        Insulation

·        LED Lighting

·        Energy Efficient Lighting Technologies

·        Efficiency Equipment

·        HVAC Upgrades

·        Weather Sealing

·        ENERGY STAR Appliances

·        Replacement of Windows and Doors

·        Installation of Geothermal Heat Pumps

·        Energy Audits/Commissioning/Retro-commissioning

·        Retrofits with Green Energy Techniques

·        Above Energy Code Pilot Projects

 

Applications for funding are filed in two stages. First, the applicant must submit a project summary on the http://recovery.ohio.gov website by April 23, 2010. Next, a complete proposal must be submitted to ODOD by April 30, 2010. Grants are to be announced around May 28, 2010.

 

 

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Mixed Use Centers - How Do You Allocate CAM?

Posted on March 9, 2010 by Scott Kadish

Almost all new build shopping centers are mixed use - they include some combination of office and residential in addition to the retail space. Elizabeth Hamilton, in house Real Estate Counsel at Office Depot, recently reminded me of the special problem this presents in allocating CAM, taxes and insurance. Some portion of each must be allocated to the office and residential components, but should it be on a strict per square foot basis for all users?  Taxes and insurance should be allocated among all users equally on a per square foot basis.  This means the dominator of the fraction defining a tenant's pro rata share should include all retail, office and residential space. (Of course, creating separate parcels eliminates or reduces the problem.) 

CAM may be more complicated. The operating expenses attributable solely to the office component (such as the maintenance of an elevator or lobby area) should be allocated only to the office tenants, meaning that those costs should be deducted from the CAM allocated to the retail tenants. But then should the balance be spread over all tenants, retail and office? Retail tenants use more CAM than office tenants so that may not really be fair. Some landlords analyze it item by item to allocate between office and retail tenants. Some simply figure out what the market rate for office is and deduct that off the top. Others deduct based on a per square foot or percentage reduction and a general application of how they think CAM should be allocated. In any of these methods, the denominator of the fraction is just the retail area (because the aggregate CAM is reduced before the fraction is applied.)
 
The key here is to recognize the issue and have the Landlord explain how it allocates each item and then to make sure the Lease reflects this methodology. There is definite room for disagreement as to how to allocate, but the actual cost difference is probably not material. However, is this not another reason why fixed CAM is better?
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Location, Location, Location !

Posted on March 8, 2010 by Brad Kaplan

 Recently, Crain's Chicago Business  published an article about Vienna Beef's Hot Dog University.  Given the continued state of the commercial real estate industry many of our colleagues have had to "look" for new opportunities.  Hot Dog U struck me as just about the most entrepreneurial idea I have seen in a long time.  All of the skills a real estate professional has acquired are necessary to be successful in operating a hot dog stand:  drive, personality, street smarts and the ability to calculate cap rates on the fly, or at least make change for a $20 bill !  But the most important skill to make a success of a hot dog stand is LOCATION, LOCATION, LOCATION !!!  Watch the video below:

 

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AFA Does Not Mean Discounting Fees

Posted on March 4, 2010 by Scott Kadish

Everyone is talking about Alternative Fee Arrangements (AFAs).  Some clients are demanding it; some firms market themselves as special because they will consider it; some attorneys are frankly scared of it because they think all it means is that they will be required to discount their fees.

In reality, an AFA is nothing more than a bill based on something other than the amount of time spent on a matter multiplied by the hourly rates of the attorneys doing the work.  Contingency fees are a prime example.  Fixed fees are another. There are obviously countless other "alternative" ways to structure a legal bill. Each may or may not be less than the traditional hourly rate fee. The reason for an AFA may be to reduce fees, but there may also be other reasons:

 

(1)        An AFA may provide certainty as in a fixed fee.  The ability to budget legal costs with certainty may be more important to a client than getting the lowest price.

 

(2)        An AFA may better align the interests of client and attorney.  AFAs with success fees or premiums for desired results may actually increase legal fees.  But the attorney is rewarded for obtaining the desired result in the most efficient manner.

 

(3)        An AFA may allow for the client to provide a larger volume of work. The larger volume should drive efficiencies which create a more profitable engagement for the law firm while providing an overall smaller legal budget for the client.

 

(4)        Where the assignments are repetitive or reusable, the law firm charging a fixed rate may lose on the first few engagements but then make it up in each subsequent assugnments.  Or, in a slight variation, a law firm can quote certain matters at a loss and others at a premium without having to account for hours where the client can afford more in some cases and less on others (e.g., more on a lease for a large space and less on a smaller lease even though the same amount of time and effort is required.)

 

(5)        The administrative costs involved with billing fixed fees, and with reviewing the bill from the client's perspective, are less than that with hourly billing. And this is actually a key benefit. A lawyer and client will never need to argue about an invoice - it is settled in advance and the issue about who spent how much time on what is eliminated. The only issue is did the attorney do a good job.

 

I think in some ways the AFA movement  may be akin to the shopping center landlords converting from charging tenants their pro rata share of CAM to now charging fixed CAM. When it first started, tenants were wary thinking it was a hidden profit center for the landlord and landlords were wary of taking the risk of loss. Eventually, landlords came to realize that it decreased conflict between landlord and tenant because they were no longer arguing what was CAM and how was it measured, and didn't need to worry about audits.  Similarly, tenants have come to see the benefit of budgeting exactly what their occupancy costs are without getting that extra reconciliation charge each year and not having to spend the time and aggravation negotiating CAM exclusions.

 

So the message is AFAs can be a great tool, and the effect on overall pricing is only one factor to consider.  They work well in many situations, not in all.  To be truly effective both the lawyer and the client need to feel fairly treated.  Like strategic business partners !

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MORE SNDA THOUGHTS....

Posted on March 2, 2010 by Scott Kadish

An interesting situation  has come up several times just recently (these issues come in droves – after never confronting the issue for a really long time, all of a sudden you get the same issue coming up again and again):

  • Tenant relocates to new space in the same center; 
  • Landlord and Tenant amend existing lease to provide new space, rent and term; 
  • Tenant entered into memorandum of lease and SNDA when it executed original lease; 
  • There is a new loan with new lender in place at the time of the relocation; and
  • Tenant enters into an amendment to the memorandum of lease at time of relocation. 

Who holds the senior interest – the tenant or the new lender?

 

If it is the same center, with the legal description of the center attached to original memorandum of lease, and the new lender consents to lease amendment, I believe the tenant should have senior interest.

 

If the tenant executed an entirely new lease rather than an amendment to the existing lease, would the analysis differ? It should not, otherwise form would trump substance.

 

A lender who consents in any way to a lease or amendment should not be able to terminate that lease upon foreclosure (unless of course if the tenant is in default).  Great minds differ on issues such as this, but law and equities lien in our direction.  What do you think ?

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