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									                                                                                                Real Estate

                                                        Steven J. Dundas
OWNERS Under review
➤➤ Continued    from page 1

about 4 million square feet of industrial and com-
mercial space in New Jersey. “They’ve exhausted
their capital budgets, or they’ve exhausted the
reserves in their loans or they’ve not reserved up
properly in the operation of the property.”
      In general, landlords are under pressure to
get space leased, said Jerry Kootman, president of
Cost Recovery Solutions, a commercial depreci-
ation consulting firm in Metuchen.
      “In this market, there are a lot more vacan-
cies — so landlords are very hungry,” he said. “In
terms of today’s economy, if he doesn’t fill out
space, it could very well mean foreclosure.”
      But landlords have struggled to lease up
space, given “the hesitancy on the part of ten-
ants to make long-term commitments,” said
David Csontos, executive manager director at
the Parsippany office of commercial real estate
brokerage firm FirstService Williams New Jer-
sey. “Most of them, for the most part, are
inclined to stay where they are and figure out
what their business model is going to look at.”
      At the same time, landlords are looking to                           Because of the down economy, tenants have requested to review landlords’ financial statements, says David Freinberg, attorney with LeClairRyan in Newark.
refinance as commercial mortgages mature, but
many are unable to obtain the same amount of                               director at the Parsippany office at Jones Lang          occurrence, since tenants previously didn’t ask
financing as in years past, owing to more stringent                        LaSalle, a real estate services firm.                    for such disclosures, he said. “It’s really a function   Smaller owners’ troubles
underwriting criteria, Csontos said. In many                                     As a result, “I’ve seen more of this scrutiny by   of the severe economic downturn that we’re in,
cases, property owners need to pay out-of-pock-                            tenants than I have ever seen,” Freinberg said. In       and really the much greater concern of the abili-        TROUBLED LANDLORDS account for only a
et or find other means to make up for the short-                           about half a dozen large leases that he’s handled        ty of the landlord to deliver what it promises.”         small percentage of real estate owners in
fall, but that could leave some cash-strapped                              in the past year, he said tenants have been very               In addition to financial disclosures, some         New Jersey, said Jeff Schotz, executive man-
landlords even more strained, making it hard for                           concerned about the wherewithal of the landlord;         tenants are requesting financial assurances from         aging director of First Service Williams New
them to pay “to do some of the work that tenants                           this was a very rare occurrence in previous years.       the landlord — usually by having the landlord’s          Jersey, in Parsippany. “The vast majority of
would like to get done” before moving in, he said.                               Some tenants have requested current                lender set aside money in an escrow account, so          buildings in New Jersey are owned by strong
      Landlords’ finances are then raising con-                            financial statements or private bank references          that a separate fund is available to pay for the         owners,” he said.
cerns among tenants in the market for new space.                           from landlords, so “you can at least get a notion        construction of the tenant’s space, Freinberg said.            “It’s the minor one-off, two-off, three-off
      “People might be more anxious to make a                              of the credit issues or creditworthiness and                   “We would always advise a tenant to be with        building owners that have serious capital
deal, and the competitive environment is such                              cash positions” of the landlord, Freinberg said.         a strong landlord,” Stanton said. But “if the eco-       problems,” said Lloyd Tulp, managing mem-
where an owner reaches beyond capacity to tie                                    This sharing of financial information with         nomic deal that’s being made is sufficiently attrac-     ber of Tulfra Realty. With larger landlords,
the tenant in a transaction that he might not be                           the tenant — usually done on the basis of a con-         tive to the tenant, it wouldn’t be out of the realm      “you have a capital base that allows you to
able to fulfill,” said Thomas Stanton, managing                            fidentiality agreement — is a relatively recent          of possibility that the tenant finances their own        move capital quickly to take advantage of ten-
                                                                                                                                    tenant work” in exchange for lower rent, several         ant opportunities.”
                                                                                                                                    months of free rent or some other concession.                  But smaller real estate owners have fewer
 Landlords can explore other options                                                                                                      The key, however, is establishing safe-
                                                                                                                                    guards for the tenant in a lease, Stanton said.
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