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and Other Financing Considerations Maximizing Opportunities to - - PowerPoint PPT Presentation

Jan 23, 2024 136 likes •562 views

Presenting a live 90-minute webinar with interactive Q&A Negotiating and Litigating Rooftop Leases: Deal Structures, Key Provisions, Subordination and Other Financing Considerations Maximizing Opportunities to Monetize Rooftop Space for

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Presenting a live 90-minute webinar with interactive Q&A

Negotiating and Litigating Rooftop Leases: Deal Structures, Key Provisions, Subordination and Other Financing Considerations

Maximizing Opportunities to Monetize Rooftop Space for Telecom Equipment, Solar Energy, Green Space and Hospitality

Today’s faculty features:

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific

WEDNESDAY, JANUARY 6, 2016

Stephen A. Kisker, Member, Chiesa Shahinian & Giantomasi, West Orange, N.J. Dov Treiman, Esq., Adam Leitman Bailey, New York

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WEST ORANGE NEW JERSEY TRENTON NEW JERSEY NEW YORK NEW YORK CSGLAW.COM

Negotiating and Litigating Rooftop Leases: Deal Structures, Key Provisions, Subordination and Other Financing Considerations

Stephen A. Kisker, Esq.

CHIESA SHAHINIAN & GIANTOMASI PC ONE BOLAND DRIVE, WEST ORANGE, NJ 07052 SKISKER@CSGLAW.COM 973.530.2074

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Types of Rooftop Leases

Cell Towers and Other Communication Equipment

  • PCS, broadband, FM & TV
  • From luxury to necessity – explosive growth

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Solar Panels and Micro Wind Turbines

  • On site consumption or grid feed
  • Distributed generation of clean, renewable energy

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Micro Wind Turbines

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Rooftop Farms

  • Distributed generation of high quality produce in urban areas
  • Rainwater recapture and reuse

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Rooftop Bars and Restaurants

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Rooftop Oasis

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Current Trends

  • Site/ Lease Buyouts
  • Lump sum up-front payment for existing leases and/or

locations

  • Developed secondary market
  • Options to Lease
  • Small income stream reserving right to lease in the

future

  • Allows a company to lock up territory with no long term

commitment

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Current Trends (cont’d)

  • Rooftop Management Companies
  • Treat your roof like any other income generating real

estate asset

  • Solar, Solar, Solar
  • 30% Investment Tax Credit extended
  • Installation costs continue to drop
  • Efficiency continues to increase
  • Federal Clean Power Plan
  • Paris Global Climate Change Agreement

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Benefits of a Rooftop Lease

  • Income – either up front or over time
  • Immediate roof repairs and/or maintenance at

little or no upfront cost

  • Increase the value of the remainder of the

building with little or no cost

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Detriments to a Rooftop Lease

  • Forgo future opportunities for easy cash up

front

  • Roof repair and maintenance
  • Loss of flexibility (casualty, condemnation,

financing, sale, redevelopment and expansion)

  • Frequently requires use of more than just the

roof (staging areas, utility easement, parking, access, data rooms, inverter pads and cable runs)

  • Structural issues

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Deal Structures

  • Simple Single Lease
  • Benefits

Monetize your roof with lump sum up-front or periodic rent payments Condition the lease on roof repairs or upgrades and/or place the

  • ngoing maintenance burden on the tenant

Little effort or cost for building owner

  • Detriments

 Sacrifice future opportunities  Roof leaks / maintenance issues

 Redevelopment / sale / reconstruction restrictions or complications  May not maximize value of entire roof  Financing complications

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Deal Structures (cont’d)

  • Multiple Leases for One Roof
  • Benefits

Opportunity to maximize value of roof

Monetize your roof with lump sum up-front or periodic rent payments Condition lease on roof repairs or upgrades and/or place the ongoing maintenance burden on the tenant

  • Detriments

 Coordination of and interference by multiple tenants – both on and off the roof

 Maintenance / repair obligations and disputes (who caused the leak !?!)

 Much more effort to put together and manage  Multiple seats at the table upon sale, redevelopment, casualty, condemnation or major reconstruction

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Deal Structures (cont’d)

  • Buyout of Existing Leases and Locations
  • Benefits

Monetize future income stream now Eliminate future management/administrative burden Remove the risk of payment defaults

  • Detriments

 Long term agreements that are very difficult to terminate  Sacrifice future opportunities and flexibility  Greater redevelopment/sale/reconstruction restrictions or complications  May not maximize value of entire roof  Frowned upon by lenders

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Options to Lease

  • Benefits
  • “Free” money
  • Very little effort and limited obligations
  • Detriments
  • Loss of future opportunity
  • Disputes and litigation

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Lease, License or Easement

  • Lease
  • Benefits

 An estate in land that provides the tenant with greater protection and an alternative financing method (leasehold mortgage)  If properly perfected it is binding on future property owners  In some states it offers landlord protection from construction liens filed by a tenant’s contractor

  • Detriments

 Frequently more difficult to terminate and regain possession  Subject to state and municipal lease formalities and tenant protection measures such as duty to mitigate, covenant of good faith and statute of frauds  Frequently requires lender approval

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Lease, License or Easement (cont’d)

  • License
  • Benefits

 Not an estate in land but rather a contract right  Frequently easier to terminate and regain possession  Not subject to state and municipal lease formalities and tenant protection measures such as duty to mitigate and statute of frauds  Does not always require lender approval

  • Detriments

 May subject owner’s property to construction lien resulting from licensee’s non-payment for licensee improvements  May not be sufficient protection to get the deal done

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Lease, License or Easement (cont’d)

  • Easement
  • Benefits

 An interest in land that provides the holder with greater protection

 Not an executory contract subject to termination in bankruptcy  Runs with the land – can be difficult to terminate  Not subject to state and municipal lease formalities and tenant protection measures such as duty to mitigate damages

  • Detriments

 Difficult to terminate and regain possession  Not easily financeable  Unorthodox  May be subject to state formalities applicable to estates in land such as the statute of frauds  Almost always requires lender approval

 May subject owner’s property to construction liens resulting from licensee’s non-payment for licensee improvements

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Practical Considerations in Structuring a Rooftop Deal

  • Maintenance
  • Roof warranty
  • Roof leaks and general maintenance
  • Rooftop equipment (vents, HVAC, etc.)
  • Removal of installations for roof repairs and replacements
  • Casualty and condemnation
  • Ancillary Rights
  • Access
  • Parking
  • Utilities
  • Staging area
  • Interference / sunlight / wind resourse

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Practical Considerations in Structuring a Rooftop Deal

  • What Else Can I Do With my Roof?
  • Lender Consent / Financing Issues
  • Will my existing and future lenders sign on?
  • Can I get recognition/nondisturbance protection?
  • Technology / Project Developer Risk
  • How long will the project function as expected?
  • Will the project developer build a quality project and operate it for the long

haul?

  • Will the project developer be able to deliver the project as and when

promised?

  • What happens if the project developer disappears or defaults?
  • Resale
  • Will the project be viewed as adding value 10 years later?

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Negotiating and Drafting Key Lease Provisions

  • Ancillary Tenant Rights
  • Need strategic plan that won’t interfere with existing operations
  • Not only for initial construction, but also for maintenance and removal
  • Staging area
  • Parking
  • Access
  • Easements inside and outside of building
  • Utilities (water and electricity)
  • Security – both of building and of project equipment
  • Coordination with existing and future tenants of building, both inside

and outside of the building – no interference with existing and future lease rights

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Negotiating and Drafting Key Lease Provisions (cont’d)

  • Term
  • Typically 15 to 20 years with additional options
  • Options carry risks for both parties as the project ages
  • Is the project still a good financial deal for the parties?
  • Is the project still performing?
  • Does the equipment require capital repairs or improvements?
  • Escrows, Bonds and Other Security
  • Performance and payment bonds for construction
  • Security deposit
  • Security for removal obligation – could be 30 years in the future

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Negotiating and Drafting Key Lease Provisions (cont’d)

  • Casualty and Condemnation
  • Rebuild obligation of building – tail wagging the dog
  • Rebuild obligation of the project owner
  • Compliance with Laws and Maintenance Issues
  • Who maintains the roof?
  • Who has access to the roof?
  • Who is responsible for compliance with law issues?
  • Does the project owner get reimbursed if the project needs to be

removed for maintenance?

  • Who pays to remove the project?
  • Who is responsible for necessary structural reinforcement?
  • Roof warranty
  • Self help

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Negotiating and Drafting Key Lease Provisions (cont’d)

  • Insurance
  • Named Insured, Additional Insured and Loss Payee
  • Special insurance considerations for specific uses
  • Insure production / technology risk?
  • Options to Purchase and Rights of First Refusal
  • Fair market value at the end of the term
  • Buyout earlier than the end of the term
  • Chilling effect and loss of control
  • Tax recapture
  • End of Term Obligations
  • Removal of project
  • Restoration of site

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Negotiating and Drafting Key Lease Provisions (cont’d)

  • Defaults and Termination Rights
  • Very difficult for project owner – death penalty
  • Makes project very difficult to finance
  • Site host must have self help rights
  • Indemnities
  • Third party liability
  • Property and personal injury
  • Lease defaults
  • Waiver of subrogation
  • Environmental contamination

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Negotiating and Drafting Key Lease Provisions (cont’d)

  • Sale of Host Property
  • Need project developers consent?
  • Do the agreements run with the land?
  • Does the project add or subtract value?
  • Taxes
  • Increase in property taxes?
  • Personal property taxes
  • Sales tax
  • Assignment
  • Consent rights
  • Release from liability?

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Negotiating and Drafting Key Lease Provisions (cont’d)

  • Scope of Installation
  • Approval rights over design and scope
  • Approval over permit and approval process
  • Aesthetics - Screening
  • Specifically define the premises and ancillary rights
  • Financing Issues
  • Lender consent
  • Recognition / Non-Disturbance
  • Collateral assignment – step in rights
  • Lender’s right cure – extension of cure periods

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Negotiating and Drafting Key Lease Provisions (cont’d)

  • Force Majeure
  • Be careful with the definition
  • Termination rights
  • Notice requirements
  • Exclusive Use Rights
  • Construction / Permit Period
  • Need definitive time to obtain permits and construct
  • Termination rights should be mutual
  • Mechanics Liens

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Negotiating and Drafting Key Lease Provisions (cont’d)

  • Alterations
  • Interference
  • Generally first in time first in right
  • Don’t let the tail wag the dog
  • Termination for Convenience

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THANK YOU!

Stephen A. Kisker, Esq. Chair, Renewable Energy and Sustainability Group Member, Real Estate Development & Land Use Group Chiesa Shahinian & Giantomasi PC 973.530.2074 SKisker@csglaw.com

Stephen Kisker, a member of the firm’s Real Estate, Development and Land Use Group, and chair

  • f the firm’s Renewable Energy and Sustainability Group, advises on all facets of commercial and

residential real estate acquisition, development, financing, redevelopment, management and

  • disposition. Steve also assists end users, contractors, developers, investors and lenders in the

sale, purchase, structuring and development of renewable energy and telecommunication projects.

Photo

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Litigation Issues to Consider When Entering Rooftop Occupancy Agreements

Dov Treiman Partner, Adam Leitman Bailey, P.C., New York City dtreiman@alblawfirm.com

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Jurisdiction and Venue

– Easements – Licenses – Leases – Problems in In rem jurisdiction

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Service of process—the proceeding

– At the occupied property – Contractual addresses – Known alternative addresses – Notice alternative addresses – Out of state addresses – Court ordered service – Service per contract

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Service of process —Preliminary notices

Service per contract

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Contra proferentem

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The collateral estoppel problem for carriers

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Effecting changes to the contract

– Changing needs – Changing technologies

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