1 00:00:01,524 --> 00:00:05,457 Welcome everybody to another episode of the Industrial Insights Podcast. 2 00:00:05,457 --> 00:00:08,260 I have Jeff Love with me from Gibbs Giden. 3 00:00:08,260 --> 00:00:17,107 And Jeff is someone I've worked with for a long time who is my go to for tough legal work that's in leases and sales. 4 00:00:17,107 --> 00:00:22,792 And I thought that's helpful for everybody to make sure their game is tight and they know what's going on these days. 5 00:00:22,792 --> 00:00:25,864 And Jeff, thanks for spending time with me today. 6 00:00:25,921 --> 00:00:26,954 Anytime. 7 00:00:27,434 --> 00:00:29,535 How many years are you in now? 8 00:00:30,746 --> 00:00:37,531 Well you're gonna make me older, but uh six about sixteen, seventeen years of doing it. 9 00:00:37,792 --> 00:00:40,835 A always real est never done litigation. 10 00:00:40,835 --> 00:00:49,672 So I'm more of I'm a transactional attorney, real estate, corporate, construction, kind of the fields that we focus on and all the overlap in between them. 11 00:00:50,538 --> 00:00:54,962 The internet would tell me you wanted to be a real estate developer someday. 12 00:00:54,962 --> 00:00:58,825 Is that uh what you had in mind before La came? 13 00:00:58,968 --> 00:01:02,680 That's it that's exactly what I wanted to do before law school. 14 00:01:02,680 --> 00:01:12,346 Um I came out of college seeing some family friends develop office building, strip centers, and I thought that was exactly for me. 15 00:01:12,346 --> 00:01:16,327 I loved real estate and I wanted to to build something. 16 00:01:16,348 --> 00:01:26,744 But I went to law school more for the education, the contracts, so I figured I can understand when I'm reviewing something and it will aid me in that part of the, you know, 17 00:01:26,744 --> 00:01:27,704 career. 18 00:01:28,344 --> 00:01:38,171 But after doing this for a couple of years I realized I kinda like a little bit more behind the scenes, a little more risk adverse, getting to work with different clients on 19 00:01:38,171 --> 00:01:39,974 different stages of projects. 20 00:01:39,974 --> 00:01:50,720 Um, you know, maybe one day I'll get there and develop some things on my own, but you know, fifteen, sixteen years later I'm still still here a practicing attorney. 21 00:01:51,673 --> 00:01:53,074 don't you love everyone in school? 22 00:01:53,074 --> 00:01:55,985 I wanna be uh investment banker. 23 00:01:56,163 --> 00:01:57,846 Uh yeah. 24 00:01:57,846 --> 00:02:00,137 And uh for real estate, yeah, the developers. 25 00:02:00,137 --> 00:02:06,630 I feel like every broker, uh that is for sure like that's step one is I wanna be a real estate developer someday. 26 00:02:07,705 --> 00:02:08,986 That's the sexy part of it. 27 00:02:08,986 --> 00:02:12,989 I've I work with a number of 'em and it's it's really hard. 28 00:02:12,989 --> 00:02:18,885 And it's it's more than you think bec especially where you get involved and what type of development you're doing. 29 00:02:18,885 --> 00:02:30,340 I mean you can get into land use issues and zoning issues and then dealing with with city and politics, um, versus, you know, if I'm just kind of a more of a flipper or I'm dealing 30 00:02:30,340 --> 00:02:31,481 with construction issues. 31 00:02:31,481 --> 00:02:37,525 So there's a lot more that goes into it than just seeing, hey, I'm just gonna go get a contractor and build a building. 32 00:02:38,627 --> 00:02:43,959 There's a lot more detail and parties and different players that you work with if you run through the whole process. 33 00:02:44,980 --> 00:02:45,411 Yeah. 34 00:02:45,411 --> 00:02:52,019 And once you've seen enough deals, you've seen the big home runs and you've seen a lot of trouble or just like it, it could be difficult. 35 00:02:52,019 --> 00:02:55,122 I I I share in that sentiment with you. 36 00:02:56,803 --> 00:03:00,355 The other thing too when you're doing it is it's you. 37 00:03:00,355 --> 00:03:03,866 Like you just said, the risk, it's a lot of reward, a lot of risk. 38 00:03:03,866 --> 00:03:14,621 But I've seen clients, you know, sign on one too many personal guarantees and you know, a refinance comes and they're not able to get the rate they expected, or they can't lease up 39 00:03:14,621 --> 00:03:19,703 a property once they develop it or run into construction issues and you can run into a lot of trouble. 40 00:03:19,703 --> 00:03:24,885 So it's definitely something you want to do your diligence for before jumping in and taking on a big project. 41 00:03:25,972 --> 00:03:26,882 Yeah. 42 00:03:26,882 --> 00:03:33,589 Well uh and then now would you say the you told me a couple of the things you work on. 43 00:03:33,589 --> 00:03:36,872 Would you say uh what's the bulk of your business? 44 00:03:36,872 --> 00:03:43,528 Would you say of like of the primary is like a leases and sales, is landlord, is shopping centers or 45 00:03:44,262 --> 00:03:49,546 Majority of our work is within the leasing and purchase and sale components. 46 00:03:49,546 --> 00:03:58,431 So we work we work with clients, both landlords and tenants, purchasers and sellers, really across most facets of real estate. 47 00:03:58,431 --> 00:04:03,674 A lot of our leasing work it's a is an industrial office and retail. 48 00:04:04,555 --> 00:04:07,637 we don't get into the the niche uses quite as much. 49 00:04:07,637 --> 00:04:08,742 And we're helping clients. 50 00:04:08,742 --> 00:04:13,753 We have a lot of manufacturers and uh you know business owners. 51 00:04:13,753 --> 00:04:21,679 Well, we will help them with their leases as they expand and then usually they'll reach a point saying, Why am I paying all this money in rent? 52 00:04:21,679 --> 00:04:24,130 Then they'll look for a building to acquire. 53 00:04:24,130 --> 00:04:29,763 And s and some of those companies have actually spun off separate real estate arms. 54 00:04:29,763 --> 00:04:38,610 Usually the owner sees the benefit of real estate and then starts funneling some of his free his or her free cash flow into other investment properties. 55 00:04:38,610 --> 00:04:43,041 Um those are the a number of clients like that. 56 00:04:43,041 --> 00:04:49,417 So we're doing now both their kind of corporate work where we started, but also the real estate and acquisition and leasing work. 57 00:04:49,961 --> 00:04:50,697 That's the best. 58 00:04:50,697 --> 00:04:52,176 That means it's working. 59 00:04:52,781 --> 00:04:55,023 Yeah, and it's it's definitely a a benefit. 60 00:04:55,023 --> 00:05:03,830 When we have one client, he's probably making as much now, if not more, from his real estate activities than the manufacturing company that he started with. 61 00:05:03,911 --> 00:05:07,364 And he's just very strategic about the industrial properties that he bought. 62 00:05:07,364 --> 00:05:12,377 And he certainly did it, you know, in Southern California at the right time. 63 00:05:12,458 --> 00:05:20,885 So now the money that's coming in from these is just is you know far surpasses or at least equal to his business activities. 64 00:05:21,609 --> 00:05:26,074 Think Cohen asset management, their origin story is a lot like that too. 65 00:05:26,074 --> 00:05:27,206 It's so cool to see that. 66 00:05:27,206 --> 00:05:35,675 And then it just turned into like, Okay, now we're investors and this is what we do and we're raising a fund and fund two, fund three, fund four and so on. 67 00:05:35,747 --> 00:05:37,299 Yeah, absolutely. 68 00:05:38,087 --> 00:05:44,908 What's uh the state of the nation in s terms of real estate laws it pertains to uh commercial and industrial? 69 00:05:44,908 --> 00:05:50,387 Is there anything that's changed a whole lot or anything that's uh like a top of mind or topical? 70 00:05:50,926 --> 00:05:54,648 Commercial's nice because the laws don't change quite as much. 71 00:05:54,648 --> 00:06:08,395 It's more economic driven in the sense that, you know, the state of politics, the state of of wars, state of the economy where we see differences in interest rates which which flow 72 00:06:08,395 --> 00:06:09,546 down to our investors. 73 00:06:09,546 --> 00:06:10,331 Are they buying? 74 00:06:10,331 --> 00:06:19,051 You know, our cash buyers they're more on the hunt because they see, you know, opportunity, but the clients that need financing, that affects them. 75 00:06:19,053 --> 00:06:29,039 But in terms of a lot, it's a lot more on the residential side, which we'll do a little bit in, but it's constant it's it changes so, so much in terms of especially when you get 76 00:06:29,039 --> 00:06:30,619 into multifamily type areas. 77 00:06:30,619 --> 00:06:41,265 But on the commercial side, what w we're seeing not so much as a change in law, but a change in a change in opportunity, a change in kind of the business economics that are 78 00:06:41,265 --> 00:06:48,269 driving certain purchases, with a lot of our clients taking a little bit more of a 79 00:06:48,973 --> 00:06:58,757 wait and see approach, a little bit more diligence, um, given kind of those external economic factors where I wanna see before I jump into a new purchase. 80 00:06:58,757 --> 00:07:11,113 Um so there's been a little bit of a little bit of slowdown on that, but at the same time the the cash buyers, which we do have a lot of those, like the manufacturing client I 81 00:07:11,113 --> 00:07:14,864 mentioned that has using the business profits to funnel into real estate. 82 00:07:15,064 --> 00:07:16,885 We have clients like that that are 83 00:07:17,141 --> 00:07:22,314 searching for for more and more opportunities and taking advantage of the deals when they can. 84 00:07:23,059 --> 00:07:23,989 Yeah. 85 00:07:24,091 --> 00:07:33,182 It seems like uh if Wall Street's on the sidelines, that opens up a lot of opportunities for people and then with rates going up and pricing being soft and there being some like a 86 00:07:33,182 --> 00:07:38,829 capitulation in pricing, that's uh that's helpful to get a lot of private deals done. 87 00:07:39,534 --> 00:07:40,075 It is. 88 00:07:40,075 --> 00:07:42,617 We still are seeing, you know, development deals. 89 00:07:42,617 --> 00:07:47,460 Um in Southern California, they're farther and fewer between. 90 00:07:47,581 --> 00:07:50,884 But we are seeing some more opportunities in in neighboring states. 91 00:07:50,884 --> 00:08:00,651 We've got a couple of Southern California based investors that are doing some rather large projects in uh northern Nevada um and also in Ariz Arizona. 92 00:08:01,373 --> 00:08:06,839 a lot of those are it's some of it's just mixed across the board. 93 00:08:06,839 --> 00:08:16,806 Not necessarily just industrial, but we have one client where it's a housing development, but then she's also got a mobile home park, she's got some retail in there, which I which 94 00:08:16,806 --> 00:08:24,261 I like and kind of encouraged her 'cause you're you're mitigating your risks by having these different asset classes within your development. 95 00:08:24,261 --> 00:08:31,546 So if one is doing a little bit having a harder time, you have these other ones that may be flourishing. 96 00:08:31,546 --> 00:08:35,543 So you're spreading out your eggs within one development. 97 00:08:35,543 --> 00:08:45,324 And you can't necessarily do that parts of where we are given the land space, but when you go to, you know, upstate Nevada where there's a lot of land, you're able to take advantage 98 00:08:45,324 --> 00:08:46,977 of some of those opportunities. 99 00:08:47,731 --> 00:08:53,612 And how's your work changed when you're working on development deals instead of purchase and sales and leases? 100 00:08:54,913 --> 00:08:55,994 A lot of it's the same. 101 00:08:55,994 --> 00:09:01,938 You know, our our our core competency is drafting, reviewing contracts, negotiating. 102 00:09:01,938 --> 00:09:13,627 So whether that's looking at a lease and those types of provisions or f or switching gears to a purchase agreement where we're really highlighting uh risk representations, 103 00:09:13,627 --> 00:09:17,609 limitations of liability, you know, in terms of an exit. 104 00:09:17,630 --> 00:09:22,423 When we do development deals, we're still looking at those, but a lot of our 105 00:09:23,297 --> 00:09:33,061 A lot of our focus may shift to the actual d development process where we might be looking at um different types of development agreements with cities. 106 00:09:33,061 --> 00:09:36,112 We might be focusing more a little bit on the construction aspect. 107 00:09:36,112 --> 00:09:42,325 Once I've acquired the land, what's my deal with my with my contractor in terms of developing this? 108 00:09:42,325 --> 00:09:52,849 But it's still that same base contract where we're taking, you know, what we know about certain provisions in agreement X and taking it over to Y. 109 00:09:53,038 --> 00:10:04,376 But we're shifting what the priorities, risks, liabilities might be so that the client is ultimately protected and the developer is protected with the risks for that specific 110 00:10:04,376 --> 00:10:05,277 project. 111 00:10:05,939 --> 00:10:06,629 Yeah. 112 00:10:06,629 --> 00:10:08,760 Uh construction agreements. 113 00:10:08,760 --> 00:10:14,793 That's something we don't get involved with a whole lot unless it's tenant improvement like related. 114 00:10:14,933 --> 00:10:20,396 And the few times I have gotten burned I still have uh scarring from. 115 00:10:20,396 --> 00:10:31,601 Uh just in terms of like overages or like gosh, any time you're in that, there's plenty of opportunity for like all the change order management and making sure you're on the right 116 00:10:31,601 --> 00:10:32,627 side of that. 117 00:10:32,627 --> 00:10:38,605 What are some things that come to mind when it comes to those that are uh good primers? 118 00:10:39,287 --> 00:10:42,300 One of the biggest thing for construction contracts, it's what you said. 119 00:10:42,300 --> 00:10:55,050 It's it's really one it's it's my price because a lot of the the negotiation up front is can I get some type of GMP or maximum price or am I doing cost plus which is more the 120 00:10:55,050 --> 00:10:55,811 norm. 121 00:10:55,811 --> 00:11:06,460 But a lot of what we've seen, this is more on the residential side, but a lot of the contracts lately are uh fixed price because we have a lot of disaster areas now in 122 00:11:06,460 --> 00:11:08,171 Southern California from these 123 00:11:08,227 --> 00:11:10,038 fires the last couple of years. 124 00:11:10,078 --> 00:11:18,984 And to your point earlier, one of the laws that have come down is I cannot charge I I cannot have a cost plus contract in a disaster area. 125 00:11:18,984 --> 00:11:20,095 It has to be a fixed price. 126 00:11:20,095 --> 00:11:27,490 So what we're going through with those contractors explaining you can't do this, you have to do it as a fixed price. 127 00:11:27,490 --> 00:11:28,731 Where is my middle ground? 128 00:11:28,731 --> 00:11:30,852 Where's my leeway if things change? 129 00:11:31,132 --> 00:11:33,894 And that's the same concept for commercial. 130 00:11:34,034 --> 00:11:38,327 We me I personally got into construction contracts from 131 00:11:38,446 --> 00:11:48,331 tenant improvement issues where we we would do an industrial lease and I have a lengthy TI agreement, which is a lot of contract-based terms. 132 00:11:48,331 --> 00:11:51,433 So I wanted to understand it better to help those clients. 133 00:11:51,433 --> 00:11:58,436 And that has developed into more of a ground up kind of construction practice where needed. 134 00:11:58,436 --> 00:12:04,699 And so what we're looking at, we're looking at we're looking at pricing, we're looking at at change orders. 135 00:12:05,660 --> 00:12:08,141 Those are the big ones where clients get exposed on. 136 00:12:08,141 --> 00:12:18,261 We're looking at termination rights because everybody knows, especially whether commercial or residential, most of the time you end up not being friends with your contractor. 137 00:12:18,261 --> 00:12:23,550 Um, whether that's the client, which is just as often as it is the contractor. 138 00:12:23,550 --> 00:12:29,413 But on both sides we want to look at termination rights, because a lot of the times it may not be working out. 139 00:12:29,413 --> 00:12:32,114 So how is each party protected in that? 140 00:12:32,895 --> 00:12:37,251 a lot of times with construction agreements, contractor wants to get paid the 141 00:12:37,251 --> 00:12:41,302 their anticipated profit for the entire contract, whether they finish or not. 142 00:12:41,603 --> 00:12:45,544 And the client wants to be able to just terminate and say, I'll pay you for what you did. 143 00:12:45,745 --> 00:12:49,026 So there's some meeting of the minds in between those two concepts. 144 00:12:49,026 --> 00:12:56,929 Um so those are some of those are at least some of the high level big ones you'll see in these construction contracts. 145 00:12:57,850 --> 00:13:06,221 and then the it kind of develops for there develops from there, excuse me, depending on how big a contract it is, how what the project is, um 146 00:13:06,221 --> 00:13:13,143 what har what are the other parties involved, how do you do payments, kind of the timing that goes into those. 147 00:13:13,223 --> 00:13:20,983 But those are very similar concepts to our leasing deals, where we're talking about, okay, w what's our all in net price? 148 00:13:20,983 --> 00:13:24,506 Well after we add in operating expenses and pricing. 149 00:13:24,646 --> 00:13:31,188 What's my uh exposure of anything in terms of liabilities, indemnities? 150 00:13:31,448 --> 00:13:33,329 How can I get out of this lease? 151 00:13:33,329 --> 00:13:34,231 Not very 152 00:13:34,231 --> 00:13:36,973 Not very easily once I sign into it, but are there certain rights? 153 00:13:36,973 --> 00:13:41,606 So it's it's those general concepts that you see in all these deals. 154 00:13:41,707 --> 00:13:50,163 There's just different parameters and what's market and what can you expect or negotiate for depending on the type of contract and and deal we're working on. 155 00:13:50,718 --> 00:14:03,066 Yeah, that reminds me of whether you do your own tenant improvements with the landlord's allowance or whether they do it and how that changes where the money goes, when it goes 156 00:14:03,066 --> 00:14:07,308 and who's in charge of what and how the risks change that way. 157 00:14:07,308 --> 00:14:11,451 That's one that's topical for a deal you and I worked on together. 158 00:14:11,451 --> 00:14:15,273 And then just like in general, like some people have uh 159 00:14:15,401 --> 00:14:21,601 the desire to do that or they want to be in control of it so that n they know it's of the quality that they're looking for. 160 00:14:21,601 --> 00:14:26,812 And that seems like that's a that's an interesting one to look at both sides of it. 161 00:14:27,415 --> 00:14:34,270 That is and that's a big kind of general concept I'd say throughout contracts is who controls. 162 00:14:34,721 --> 00:14:45,560 I just had a conversation yesterday and that was back in the construction area, but it was a builder's risk policy, who should buy it and who should make sure it's done? 163 00:14:45,560 --> 00:14:56,485 Now obviously it's gonna get billed back to the client, but if I'm the contractor, I kinda wanna purchase it myself so I make sure it's done, I make sure it's done correctly. 164 00:14:56,485 --> 00:14:57,293 Um 165 00:14:57,293 --> 00:15:00,075 versus having the client do it, are they actually getting it? 166 00:15:00,075 --> 00:15:02,476 Am I named as an additional insured? 167 00:15:02,617 --> 00:15:11,843 And that concept goes back to our leasing where it's do I want to what can I be in charge of knowing that I'm wanting to responsible and get it done? 168 00:15:12,124 --> 00:15:13,785 What don't I want to be in charge of? 169 00:15:13,785 --> 00:15:17,728 Because it's also an administrative burden where I need someone to be on top of it. 170 00:15:17,728 --> 00:15:19,589 I need to calendar dates. 171 00:15:22,051 --> 00:15:22,891 Who should do that? 172 00:15:22,891 --> 00:15:32,596 So that's a that's a topic that comes up a lot with clients, more from a business perspective than anything, is what do you want to be in charge of knowing that these are 173 00:15:32,596 --> 00:15:36,167 the risks and parameters surrounding that? 174 00:15:36,628 --> 00:15:37,508 and you'd be surprised. 175 00:15:37,508 --> 00:15:42,050 A lot of times clients will say, I want no part of it, I don't want to do it, I just want it done. 176 00:15:42,050 --> 00:15:48,032 But when you explain, you know, the pros and cons of like you said, in a TI situation. 177 00:15:48,032 --> 00:15:56,846 I'm gonna do the work and get the money and I can make sure it's done right with the right materials and really try to stay on schedule and not be at the mercy of my landlord's 178 00:15:56,846 --> 00:15:57,626 contractor. 179 00:15:57,626 --> 00:16:03,948 Um decisions often change and they're like, okay, well may maybe I will do it myself. 180 00:16:03,948 --> 00:16:08,250 Um, but then you get into other issues where I need the money. 181 00:16:08,250 --> 00:16:14,853 So can I get more of that TI allowance up front rather than reimburse and submit it over time? 182 00:16:14,853 --> 00:16:16,162 Um 183 00:16:16,345 --> 00:16:26,315 a lot of the issues we deal with are kind of uh interwoven and I c I wanna do one thing but it's dependent on another factor like proceeds of a TI allowance. 184 00:16:27,157 --> 00:16:37,107 It's so funny to think how much of that is um there's a standard way of doing it and how much you recognize is negotiable and like situation dependent. 185 00:16:37,107 --> 00:16:46,577 And maybe I used to think it was like eighty percent like a boilerplate best practice and now you're like maybe it's twenty percent and it's eighty percent like crafting it for 186 00:16:46,577 --> 00:16:50,721 their unique situation and desires. 187 00:16:51,641 --> 00:16:58,421 It's great point b and that's where someone like you comes in and adds value because you're looking at each individual deal. 188 00:16:58,421 --> 00:17:08,236 You know, if every deal was the same, okay, landlord's gonna do the TI build out or tenants gonna do it, and I'm gonna pay you once you give me, you know, your your signed 189 00:17:08,236 --> 00:17:19,255 off permits and lien waivers, but there are situations where that might not be the case or might not be best for that client, and that's when you need the advisor to come in and say 190 00:17:19,767 --> 00:17:21,578 I've done 500 deals just like this. 191 00:17:21,578 --> 00:17:24,100 Have you thought about A, B, and C? 192 00:17:24,100 --> 00:17:28,484 Um, and that's where a lot of the value comes in. 193 00:17:28,484 --> 00:17:40,734 Um, because we get questions a lot times, you know, I can just review this lease, or much more lately, I just ran it through AI, and that's the, you know, term of the day, and this 194 00:17:40,734 --> 00:17:41,835 is what it's said to do. 195 00:17:41,835 --> 00:17:47,440 And we come in and say, Well, have you thought about that A, B, and C? 196 00:17:47,440 --> 00:17:49,621 And nine times out of ten, they haven't. 197 00:17:49,892 --> 00:17:59,957 So that that may affect who does the control in these types of situations or maybe you deviate from what is typical or what is market and you be able to negotiate those terms to 198 00:17:59,957 --> 00:18:03,351 better service a client and better fit their needs. 199 00:18:04,009 --> 00:18:06,875 You you went twenty four minutes without saying AI. 200 00:18:06,875 --> 00:18:08,419 That's that's pretty good, Jeff. 201 00:18:08,419 --> 00:18:09,489 That's longer than most. 202 00:18:09,489 --> 00:18:11,010 know, I'm trying. 203 00:18:11,010 --> 00:18:13,110 It comes up every day now. 204 00:18:13,140 --> 00:18:15,269 so it's it it's hard to avoid. 205 00:18:15,269 --> 00:18:19,732 Um, but you know, it's there's pros and cons to it. 206 00:18:19,732 --> 00:18:30,575 Um we have a lot of clients that you know I I I try not to it's you I don't think you can avoid it at this point. 207 00:18:30,575 --> 00:18:37,877 And it's if you don't accept it, you know clients will they'll move on, they'll want someone that's using it. 208 00:18:37,943 --> 00:18:48,759 So what we see a lot of I guess the the the pro is a lot of the research is much quicker, which we're able to pass on savings and and lower cost to clients. 209 00:18:48,759 --> 00:18:55,903 Um but you have that's us researching certain issues, certain drafting provisions. 210 00:18:55,903 --> 00:19:02,307 Um that's kind of the pro is you're able to have that access to that information that quickly. 211 00:19:02,307 --> 00:19:07,149 You're able to check documents, you know, see where another third party 212 00:19:07,437 --> 00:19:14,383 Where's my risk exposure where I could say normally I could have another partner or colleague or secretary, hey, can you proofread this for me? 213 00:19:14,383 --> 00:19:15,944 Can you see what you think? 214 00:19:15,944 --> 00:19:22,209 You can immediately have that access to have another point of view, but it's not always right. 215 00:19:22,209 --> 00:19:24,981 I'd say it's wrong as more often as it is right. 216 00:19:24,981 --> 00:19:29,995 Especially in terms of if I'm looking at statutes or certain provisions. 217 00:19:29,995 --> 00:19:37,241 Um and the big negative is kind of part of that positive, is clients will run it through that 218 00:19:37,526 --> 00:19:50,594 And they're creating more additional work for themselves and for us, where you may bring up ten good provisions because an AI usually will highlight everything, but you have to 219 00:19:50,594 --> 00:19:55,576 take into account what's what's a market term, what a landlord will agree to. 220 00:19:56,477 --> 00:20:03,691 you know, it comes up with issues like gross negligence or negligence or acts and omissions in terms of indemnities and doesn't realize 221 00:20:03,745 --> 00:20:08,476 A landlord's not normally gonna agree to indemnify you for their acts and omissions. 222 00:20:08,476 --> 00:20:14,088 At best you're gonna get a more stringent standard and it doesn't pick up on things like that. 223 00:20:14,108 --> 00:20:24,731 So we're having to spend time going now through and revising the agreements or ha longer conversations with clients telling them why they why certain provisions don't apply. 224 00:20:24,805 --> 00:20:32,853 So inadvertently they're creating more work, higher costs on some of these contracts by using 225 00:20:32,853 --> 00:20:33,684 certain AI. 226 00:20:33,684 --> 00:20:36,417 So that's kind of one of the cons that comes in. 227 00:20:36,417 --> 00:20:39,160 So it's really I like it. 228 00:20:39,160 --> 00:20:49,993 I don't there's certain situations we use it, certain situations we don't, but you have to adapt it because I think it will get better and better and it will be more widely used as 229 00:20:49,993 --> 00:20:52,515 it gets better and we progress over time. 230 00:20:52,516 --> 00:20:54,357 It's just using it in the right way. 231 00:20:56,115 --> 00:21:00,696 Yeah, let's do it in the wrong way enough times until we know what the right way is. 232 00:21:01,855 --> 00:21:11,260 It's well I got one, I mean I got one the other day and one, it's funny 'cause you you can always tell when it when it's written, uh especially with clients you've known for years 233 00:21:11,260 --> 00:21:19,595 and all of a sudden their emails are incredibly more detailed and they're asking questions they've never ever asked before. 234 00:21:20,325 --> 00:21:23,697 I mean So it's it's great and I'm glad they're using it. 235 00:21:23,697 --> 00:21:30,571 I'm glad they're they're looking at it and wanting to make sure that everything is being uh a addressed. 236 00:21:31,097 --> 00:21:36,101 But at the same time, one of the biggest things we want is to keep costs in check. 237 00:21:36,462 --> 00:21:38,164 make sure we're being efficient. 238 00:21:38,164 --> 00:21:47,221 So a lot of times we'll bring that up and say, We'll go through all the questions, we'll make sure, but make sure you realize a a lot of this is not applicable and these are the 239 00:21:47,221 --> 00:21:48,213 reasons why. 240 00:21:48,544 --> 00:21:49,354 Yeah. 241 00:21:49,695 --> 00:21:50,886 It's not market. 242 00:21:50,886 --> 00:21:53,939 I love that 'cause it works for uh economics. 243 00:21:53,939 --> 00:22:05,069 Well like people will ask for stuff that's not market and then uh that certainly applies to legal and to language and to rights and responsibilities and risks and market changes. 244 00:22:05,153 --> 00:22:05,794 Yeah. 245 00:22:05,794 --> 00:22:09,973 And I used to hate the term market, especially when I would negotiate with other attorneys. 246 00:22:09,973 --> 00:22:12,220 I said everything was negotiable, right? 247 00:22:12,220 --> 00:22:17,095 It may not be market for this tenant, but this is a unique deal where I'm gonna go outside of market 248 00:22:17,095 --> 00:22:20,001 It's becoming market today on this phone call. 249 00:22:20,001 --> 00:22:27,303 it's becoming market and I'll I'll use it more to say not just what's market but just something it's so outside of the norm. 250 00:22:27,383 --> 00:22:29,624 You're never gonna get that. 251 00:22:29,624 --> 00:22:38,086 Um everything's negotiable to an extent, but if you're so unreasonable and if it's so outside, you know, market, then you're wasting your time. 252 00:22:38,106 --> 00:22:47,429 So I have used it more and more and I think I will use it more and more because it's a easy way to explain Guys, come on, we gotta we gotta be reasonable or you're just not 253 00:22:47,429 --> 00:22:48,615 gonna get your deal done. 254 00:22:49,139 --> 00:22:49,850 Yeah. 255 00:22:49,850 --> 00:23:03,692 It's uh wasn't it already hard enough when you think of people bringing up issues and not that like they are not valid, like you have to tailor everything to the client and to the 256 00:23:03,692 --> 00:23:04,903 situation. 257 00:23:04,929 --> 00:23:09,948 But um it like there's an extra fatigue level to it for sure. 258 00:23:09,948 --> 00:23:15,783 I could only imagine 'cause you like uh would see this even more than I and 259 00:23:15,795 --> 00:23:28,416 You would think it's fatiguing on their end too, or for landlords as well, and like we're looking for less friction and it's curious to think of is it is the result better? 260 00:23:28,477 --> 00:23:32,860 Like did everybody get a bigger win win as a result? 261 00:23:33,201 --> 00:23:37,775 Maybe over time, but yeah, maybe we're in that messy middle like a before that point. 262 00:23:38,522 --> 00:23:40,803 And that's that's what most of these deals are, right? 263 00:23:40,803 --> 00:23:43,506 It's never perfect for the landlord or the tenant. 264 00:23:43,506 --> 00:23:48,129 It's a m part of it's a matter of leverage, but you want a deal that's workable. 265 00:23:48,130 --> 00:23:51,052 That's why I always like transactional work versus litigation. 266 00:23:51,052 --> 00:23:54,234 Litigation, you know, you're fighting over the same thing. 267 00:23:54,415 --> 00:23:57,898 Usually you got a winner and a loser when you're f when you have a lawsuit. 268 00:23:57,898 --> 00:24:04,283 With transactional leasing and purchases, somebody wants to lease, somebody wants to occupy the space. 269 00:24:04,403 --> 00:24:07,135 So we're working towards a common goal. 270 00:24:07,381 --> 00:24:12,261 And there's some negotiation as to what provisions I can live with or landlord can live with. 271 00:24:12,261 --> 00:24:14,333 You know, we see it a lot with guarantees. 272 00:24:14,333 --> 00:24:20,565 You know, landl I want to be protected for every penny, but the tenant doesn't want to be personally exposed. 273 00:24:20,665 --> 00:24:31,369 So this helps kind of some of that meeting in the middle, but there is the concern now where if I'm gonna fight over every provision, because I ran it through an AI service and 274 00:24:31,369 --> 00:24:33,099 it shows me all of my risk. 275 00:24:33,623 --> 00:24:38,376 I'm not gonna get that deal done because I'm being too aggressive and I'm not giving enough compromise. 276 00:24:38,376 --> 00:24:49,021 Um I'm not understanding how the market works or working with someone that's done this so many times where most most leases are a little bit landlord friendly. 277 00:24:49,021 --> 00:24:52,423 Um they're not always directly in the middle. 278 00:24:53,544 --> 00:25:03,529 you get a new tenant that realizes that, especially when you're maybe you're a very small tenant with a very large industrial landlord and they have their lease form and you can't 279 00:25:03,649 --> 00:25:05,291 Mark up every single turn. 280 00:25:05,291 --> 00:25:10,375 Maybe there's, you know, half a dozen where I can say, These are the ones that are important to me. 281 00:25:10,615 --> 00:25:20,394 Maybe my guarantee, maybe my ultimate, you know, cash out of pocket, um, liabilities, uh, indemnities, but I'm gonna hit a few of them. 282 00:25:20,394 --> 00:25:22,225 I can't hit every provision. 283 00:25:22,466 --> 00:25:24,828 And that's kind of what we're seeing with some of this AI. 284 00:25:24,828 --> 00:25:25,976 It highlights everything. 285 00:25:25,976 --> 00:25:28,488 great equalizer for the little guy, Jeff. 286 00:25:28,488 --> 00:25:41,320 If you think of perhaps uh shoe on the other foot would be um how much do you see landlords changing their contracts based on AI being available? 287 00:25:41,320 --> 00:25:47,005 And would you say m a lot or you would say like, eh, they kinda not a whole lot has changed? 288 00:25:47,532 --> 00:25:49,813 I don't think a lot's changed from the landlord perspective. 289 00:25:49,813 --> 00:25:54,133 Because we we represent both sides a lot of deals, so we're seeing all of it. 290 00:25:54,824 --> 00:26:04,366 most of what a landlord will change, they're not changing anything additional because a tenant sent sent them an AI markup or brought up those changes. 291 00:26:04,366 --> 00:26:12,128 They're gonna change provisions that they have the ability to do within, you know, their business framework in order to get a deal done. 292 00:26:12,148 --> 00:26:17,389 Now they they may agree to cap certain operating expenses. 293 00:26:17,389 --> 00:26:21,611 They may agree to look at some look back or have a burn off on a guarantee. 294 00:26:22,491 --> 00:26:26,232 exclude certain uh o operating expenses, maybe. 295 00:26:26,413 --> 00:26:31,595 But that doesn't change because a tenant brought up thirty risk factors and said this this is not fair. 296 00:26:31,615 --> 00:26:36,937 We have one now that we're working on and the landlord, you know, it's their form. 297 00:26:36,937 --> 00:26:43,180 They have the same form for, you know, all of their properties, dozens and dozens of different tenants. 298 00:26:43,220 --> 00:26:46,421 They'll make there's a few areas where they'll move. 299 00:26:46,465 --> 00:26:47,766 Otherwise the answer is no. 300 00:26:47,766 --> 00:26:54,008 So on this one, we had to tell a tenant basically sign it or don't sign it, take it or leave it. 301 00:26:54,008 --> 00:26:59,650 And I hate doing that 'cause it there's a risk that the deal dies, but that's what the landlord wanted. 302 00:26:59,650 --> 00:27:05,252 And that so the tenant needs to make a decision where landlord's not going to entertain maintain your thirty changes. 303 00:27:05,252 --> 00:27:08,053 It's I'm going to sign or I'm going to find another space. 304 00:27:11,417 --> 00:27:17,344 Yeah, that's which could have happened uh either way, but maybe like there's more room for that. 305 00:27:17,344 --> 00:27:26,714 But uh it's funny 'cause the landlord contract hasn't really changed in terms of the original drafting, like as the result of AI, like so much. 306 00:27:26,714 --> 00:27:33,219 Like Prologis hasn't changed their lease because AI is now available and they have AI like scanning it and so on and so forth. 307 00:27:33,594 --> 00:27:38,695 I think just the good part is not the lease is changing or will change if ever. 308 00:27:38,855 --> 00:27:48,728 It's just a it's a knowledge base for t for tenants, landlords, where you can summarize it and say, Okay, these are my risks or even better, these are my obligations and it can 309 00:27:48,728 --> 00:28:01,141 create, you know, summaries and outlines for you of when my rent is due, what when do I have to flag for me when I have to give a notice of an option, when I have to exercise it. 310 00:28:01,141 --> 00:28:02,573 Put it on my calendar. 311 00:28:02,573 --> 00:28:04,518 Put it on Jeff's calendar too. 312 00:28:04,518 --> 00:28:06,199 my calendar, even better. 313 00:28:06,219 --> 00:28:09,641 Those are the things that I think are nice and that save time. 314 00:28:09,861 --> 00:28:18,276 You know, you always want to double check it because it's it can be wrong, but that is a time saving and that's where I think it'll be u a useful tool for both landlords and 315 00:28:18,276 --> 00:28:23,679 tenants, um, is ability to abstract information uh very quickly. 316 00:28:24,041 --> 00:28:30,424 Yeah, that's taking it to like the practical perspective, not just like the legal contract negotiation perspective. 317 00:28:30,424 --> 00:28:31,186 Right. 318 00:28:32,491 --> 00:28:36,055 'cause yeah, that would just come back to so what is the best use of it? 319 00:28:36,055 --> 00:28:49,721 And that would be one way to help you like be aware of and then use your own judgment to prioritize what you should address plus all these other practical add ons 320 00:28:49,721 --> 00:28:51,191 that are super helpful. 321 00:28:51,777 --> 00:28:52,021 Right. 322 00:28:52,021 --> 00:28:52,955 Good point. 323 00:28:54,075 --> 00:28:54,385 Yeah. 324 00:28:54,385 --> 00:28:55,696 Um cool. 325 00:28:55,696 --> 00:28:59,589 I'd say otherwise let's all industrial. 326 00:28:59,589 --> 00:29:03,171 We gotta make sure the industrial guys get learn everything they can here. 327 00:29:03,171 --> 00:29:11,015 So if we just think of like industrial leases that we've worked on, uh maybe with manufacturers, they have their own issues. 328 00:29:11,097 --> 00:29:23,559 And then ones I'm dealing with now, I have a large one that's a renewal that had a a property manager did hired some vendors to do some landscaping work. 329 00:29:23,559 --> 00:29:31,091 They leave a valve on, water's everywhere, the water bill is super high, a one-off fluke event from a vendor. 330 00:29:31,151 --> 00:29:45,375 And now it's time to of course have that in mind when it comes time to work on the contract and trying to think of like uh enforcing property management performance and like 331 00:29:45,375 --> 00:29:47,476 a notice standards. 332 00:29:47,516 --> 00:29:51,420 I've never seen any of that in any leases, like trying to have 333 00:29:51,420 --> 00:30:00,636 The tenant dictate to the landlord, dictate to the property manager, like how long is it until you confirm you've received my call, till you dispatch people there? 334 00:30:00,636 --> 00:30:07,641 What if the they do bad work and the landlord now must pay for it and get reimbursed by the vendor? 335 00:30:07,641 --> 00:30:12,064 So that's an interesting one that is timely that I've I've not delved into at all. 336 00:30:12,064 --> 00:30:13,595 I'm curious if you ha 337 00:30:14,411 --> 00:30:24,826 That's probably one of the five biggest issues I'd see in an industrial lease is kind of the maintenance and repair obligations where a lot of the uh not all but a lot of 338 00:30:24,826 --> 00:30:35,070 industrial buildings, you might have a a single tenant where when you talk about shopping centers and and office, it's almost you know, universal to have multiple tenants. 339 00:30:35,070 --> 00:30:42,323 So one of the things that we're looking for in in in leases is exactly that, is is maintenance obligations and 340 00:30:43,061 --> 00:30:47,383 what is the landlord's timing in terms of repairing something. 341 00:30:47,383 --> 00:30:51,421 It's very hard to t to pin them down on a timing. 342 00:30:51,421 --> 00:30:56,809 You know, the best you can do is use certain language where where they're gonna use their best efforts. 343 00:30:56,809 --> 00:31:01,611 If you can give them another another notice, that kind of ties in into default. 344 00:31:01,611 --> 00:31:08,555 But what we focus more on is not kind of the notice which is hard is is is money. 345 00:31:08,555 --> 00:31:12,757 Because that's even apart from notice, money is probably the bigger 346 00:31:12,765 --> 00:31:16,748 Issue that we see, and that's who pays for all of this. 347 00:31:16,748 --> 00:31:21,071 Now, if it's a true triple net, okay, but talk about a roof. 348 00:31:21,071 --> 00:31:23,232 Am I responsible for the entire roof? 349 00:31:23,232 --> 00:31:25,885 Am I responsible for just for just for the membrane? 350 00:31:25,885 --> 00:31:31,338 Uh, are there structural issues that the landlord needs to be responsible versus me? 351 00:31:31,338 --> 00:31:40,245 You know, just as well as I do, HVAC comes up all the time uh because tenant doesn't want to pay for it, landlord says tenant wants to pay for it. 352 00:31:40,245 --> 00:31:41,065 So 353 00:31:41,193 --> 00:31:47,038 Maintenance and repair obligations is one of the big ones that I would have all day. 354 00:31:47,038 --> 00:31:49,338 quarter after quarter, for the whole lease. 355 00:31:49,398 --> 00:31:50,799 And that's one that doesn't go away. 356 00:31:50,799 --> 00:31:55,023 You know, assignment and subletting is another big one, especially if you want to sell your business. 357 00:31:55,023 --> 00:31:56,884 But that might happen once. 358 00:31:56,884 --> 00:32:00,827 The maintenance and repairs is an ongoing constant issue. 359 00:32:00,827 --> 00:32:04,390 So that is one that I'd make sure I understand. 360 00:32:04,390 --> 00:32:13,437 You can have your AI come in and actually summarize what are my maintenance obligations versus the landlord, which is one practical aspect of when you can use it. 361 00:32:13,538 --> 00:32:17,717 And before you sign your lease, that's when you or your your 362 00:32:17,717 --> 00:32:27,665 you know, your broker, you want to go in and anything that is unreasonable or not workable from your standpoint, that's what I want to negotiate. 363 00:32:27,665 --> 00:32:39,493 Where if I really need the landlord to maintain something, or I wanna be able to maintain this portion, um, that I'm able to do that and that the lease provision specifies that. 364 00:32:39,943 --> 00:32:40,713 Yeah. 365 00:32:40,873 --> 00:32:42,914 'Cause I feel like sometimes who pays for it? 366 00:32:42,914 --> 00:32:53,649 They can uh the mechanics of who actually does it and whether it's reimbursed, sometimes like an AIR is kind of opaque where it's like, Yeah, you do it and then the the tenant 367 00:32:53,649 --> 00:33:01,683 might be responsible for paying for it, but then you come to find the landlord actually is the one doing it and reimbursing or getting reimbursed. 368 00:33:01,683 --> 00:33:06,745 And it's funny that some of those can be opaque instead of like very black and white. 369 00:33:07,337 --> 00:33:12,939 It is especially the payment and the reimbursement and then what type of repairs. 370 00:33:12,939 --> 00:33:22,873 When you look at like the AIR form, when you start getting into capital expenditures, you've got a completely different section about who pays for it based on when you are in 371 00:33:22,873 --> 00:33:26,285 the lease and who's mandating that repair. 372 00:33:26,305 --> 00:33:36,641 So it's it's really beneficial to go through those and understand who's making it, who's reimbursing who, if anything, what's the timing? 373 00:33:36,641 --> 00:33:38,182 for those repairs. 374 00:33:38,422 --> 00:33:41,885 And if it's if it's all landlord or all tenant, so be it. 375 00:33:41,885 --> 00:33:48,859 But as long as you understand it as the tenant or the landlord and are comfortable with the way that it's written, that's the ultimate goal. 376 00:33:49,035 --> 00:33:49,935 Yeah. 377 00:33:50,255 --> 00:34:00,539 I love that it can be negotiable where you're on the hook for it and then it's time to renew and you would think you would continue to be on the hook for it renewal like a roof 378 00:34:00,539 --> 00:34:02,900 amortization schedule or something like that. 379 00:34:02,900 --> 00:34:12,184 And if the market doesn't provide for it 'cause it's soft, you can be like, Okay, I don't pay for that for the next five years anymore, that 'cause that's what a market is. 380 00:34:12,184 --> 00:34:16,367 And to have those things like also be subject to negotiation again. 381 00:34:16,367 --> 00:34:17,623 At renewal time. 382 00:34:17,623 --> 00:34:22,379 That's always interesting to see like, okay, what do we change and what stays the same this go right? 383 00:34:23,467 --> 00:34:25,097 People in people miss that. 384 00:34:25,097 --> 00:34:32,239 You know, you think, I can just especially, you know, newer tenants that haven't, you know, this might be their first big lease. 385 00:34:32,770 --> 00:34:34,400 I have to exercise my option. 386 00:34:34,620 --> 00:34:40,662 No, that that's really just your right to do so and you have the right to stay in the l in in the lease on those terms. 387 00:34:40,662 --> 00:34:49,324 But that's a gr golden opportunity to fix any issues you've been having or to talk to someone like you, Justin, say, What's the market? 388 00:34:49,324 --> 00:34:51,745 Am I this is a good deal or bad deal at this time? 389 00:34:51,745 --> 00:34:52,351 And 390 00:34:52,351 --> 00:34:58,528 Maybe extract some concessions from the landlord or fix those repair or maintenance issues. 391 00:34:58,528 --> 00:35:03,755 Um maybe your business expanded and the initial permitted use you had was narrow. 392 00:35:03,755 --> 00:35:12,425 That's a good time where I'm able to expand my my warehouse and distribution permitted use to maybe something else that wasn't included. 393 00:35:13,477 --> 00:35:16,659 Will call, training centers, all bad stuff. 394 00:35:16,659 --> 00:35:17,140 Yeah. 395 00:35:17,140 --> 00:35:22,303 Um Yeah, options. 396 00:35:22,303 --> 00:35:25,906 Have you uh tangoed in the option world? 397 00:35:25,906 --> 00:35:30,989 I feel like the more I get those for people, the more I realize how flawed they are. 398 00:35:30,989 --> 00:35:42,077 And they're not getting less flawed in terms of how you do them, where there is like opaqueness in the process or mechanics. 399 00:35:42,085 --> 00:35:51,585 And it seems like you could make a ten page contract out of option language if you really wanted to like uh waste a bunch of time and brain cells on 400 00:35:52,744 --> 00:36:00,758 I don't think I've seen a client formally exercise an option at least any client, at least the last five years. 401 00:36:01,639 --> 00:36:11,994 No, we get them in every lease because what it does is it I think it creates kind of a baseline where, hey, I'm good friends with this landlord and I really like the space and 402 00:36:11,994 --> 00:36:16,946 he sells the building and that next landlord wants to tear it down and redevelop it. 403 00:36:17,147 --> 00:36:19,988 Well now I'm screwed and I lost my build out. 404 00:36:19,988 --> 00:36:22,397 That's where an option is nice 'cause I 405 00:36:22,397 --> 00:36:27,941 I can now the rent might be higher than I like, but at least I have the right to stay in the space. 406 00:36:28,161 --> 00:36:33,345 I think that's the value that it adds, but in terms of actually exercising it, no. 407 00:36:33,345 --> 00:36:42,251 Most tenants are gonna do it themselves or more intelligently, have their broker come and represent them and say, What is the market in rent? 408 00:36:42,251 --> 00:36:46,224 We're gonna renegotiate the rent, we're gonna renegotiate any other terms. 409 00:36:46,224 --> 00:36:50,677 Uh we might add on another option or expand the term. 410 00:36:50,997 --> 00:36:53,038 And that's the great time to do that. 411 00:36:53,138 --> 00:37:01,821 We could we like you said we could have a ten page option agreement where we talk about exactly what the market is and what should be included in the determination of fair market 412 00:37:01,821 --> 00:37:06,143 value rent and what is not and what percentage of fair market value rent is there? 413 00:37:06,143 --> 00:37:11,585 And is there a baseline and a cap on terms of the increase in fair market value rent? 414 00:37:11,806 --> 00:37:14,027 and it's those just goes on and on. 415 00:37:14,027 --> 00:37:20,309 But pr from a practical standpoint, which is really like how we like to look at 416 00:37:20,661 --> 00:37:24,444 How we like to look at leases is not just the legal lease. 417 00:37:25,585 --> 00:37:27,287 How is this going to work in practice? 418 00:37:27,287 --> 00:37:30,379 Um, so it's not it's not usually worth it. 419 00:37:30,379 --> 00:37:37,475 It's like I said, we we have the baseline, we have it in there because it gives you a little bit of that leverage and negotiating power. 420 00:37:37,535 --> 00:37:45,632 But what you're gonna do when the option comes up is you're gonna reach out to landlord and you're gonna negotiate the terms just like you did at the uh you know, initial outset 421 00:37:45,632 --> 00:37:46,763 of your lease. 422 00:37:47,024 --> 00:37:49,295 And that's how you're gonna get the best deal possible. 423 00:37:50,046 --> 00:37:50,206 Yeah. 424 00:37:50,206 --> 00:38:04,372 I I I got roped into uh sizable arbitration where I got to be the third party that was like the independent party to see how each side was trying to get their way where for what 425 00:38:04,372 --> 00:38:06,152 fair market value would be. 426 00:38:06,173 --> 00:38:17,577 And then your instructions are to interpret the lease and then I found like uh the set of instructions was woefully inadequate where you were like, Okay, well what do you do when 427 00:38:17,593 --> 00:38:21,794 It doesn't tell you what to do clearly or when there's things that conflict. 428 00:38:21,794 --> 00:38:24,055 And uh that was a doozy. 429 00:38:24,055 --> 00:38:34,498 That totally gave me too much information in terms of now knowing like a crafting those in the future and like a recognizing how fraught with error they can be if you actually like 430 00:38:34,498 --> 00:38:45,141 go to the mat on one with a dispute and then try and like go back to the one page from whoever did it from whenever they were zooming through their deal and then try and like 431 00:38:45,141 --> 00:38:46,183 have uh 432 00:38:46,183 --> 00:38:48,885 Tens of millions of dollars live and die on it. 433 00:38:49,471 --> 00:38:55,791 And it becomes hard when you have a landlord broker or appraiser and a tenant broker or an appraiser don't agree. 434 00:38:55,791 --> 00:39:03,734 And then if you come in as a third party and if everyone's interpreting a lease differently or what the mechanics or logistics are, you could come up with pretty 435 00:39:03,734 --> 00:39:04,905 different numbers. 436 00:39:05,413 --> 00:39:06,294 Yeah. 437 00:39:06,316 --> 00:39:10,949 So I'm gonna politely decline that next opportunity, I would say. 438 00:39:11,458 --> 00:39:12,847 One and done, huh? 439 00:39:12,923 --> 00:39:13,793 Yes. 440 00:39:14,214 --> 00:39:14,914 Yes. 441 00:39:14,914 --> 00:39:19,276 Uh anything else topical you can think of for industrial leases? 442 00:39:19,977 --> 00:39:22,568 there's always environmental as one. 443 00:39:22,568 --> 00:39:26,901 That's uh perhaps not too much changes, but yeah, anything. 444 00:39:26,901 --> 00:39:27,801 you beat me to it. 445 00:39:27,801 --> 00:39:36,106 I was gonna give you the top five and we talked about, you know, our permitted use, we've talked about assignment and sublitting, you brought up repairs and maintenance. 446 00:39:36,106 --> 00:39:42,209 I'd say the other two that come up a lot and deserve the focus are environmental liability. 447 00:39:42,330 --> 00:39:43,701 Um, you don't even need me, Justin. 448 00:39:43,701 --> 00:39:45,051 You you got all the five yourself. 449 00:39:45,051 --> 00:39:55,647 Uh and that one's just because it's such it there can be so much exposure and it can be so expensive, especially in industrial properties. 450 00:39:55,904 --> 00:39:58,530 Because we don't know what the prior prior use was. 451 00:39:58,530 --> 00:40:04,174 And because we might have manufacturing, we may have those hazardous substances, that's really one. 452 00:40:04,174 --> 00:40:11,118 can you get off the hook w with a NFA letter if you sell your property or you on the hook for life? 453 00:40:11,118 --> 00:40:15,753 I feel like that's one that like everybody assumes you get an NFA letter and you're done. 454 00:40:15,753 --> 00:40:23,005 And then the further I've walked down the path on that, it sounds like uh that may or may not actually be the case. 455 00:40:23,761 --> 00:40:25,483 You're never gonna get off completely. 456 00:40:25,483 --> 00:40:35,661 What the what they tell the phase one and the letters kinda help with is you try you try to make yourself an innocent bona fide purchaser with the government, saying, I've done 457 00:40:35,661 --> 00:40:36,682 all my due diligence. 458 00:40:36,682 --> 00:40:44,928 Um, you can always get sued by a subsequent purchaser or tenant if they can claim that you did something on the property. 459 00:40:44,928 --> 00:40:50,463 And the the big negative with our legal system is anybody can sue anybody for anything. 460 00:40:50,463 --> 00:40:53,405 So you can have a perfect letter, you can do nothing wrong. 461 00:40:53,589 --> 00:41:01,094 And I can have a future uh you know, a buyer come back and say, I'm gonna sue that prior owner 'cause I think they were responsible. 462 00:41:01,175 --> 00:41:08,100 And even if you get rid of it, even if you have your letter, you're still gonna be responsible for legal expenses getting out of it. 463 00:41:08,189 --> 00:41:14,464 So the the best you can do is get my letter, if I'm a buyer, get my phase one. 464 00:41:14,505 --> 00:41:20,277 And that's where negotiating a purchase agreement or a you know, even a lease really becomes important. 465 00:41:20,277 --> 00:41:29,540 Because I want to look at my indemnity obligations, I want to look at my limitation of liability, I wanna look at any releases, and I wanna try to make those as strong as we 466 00:41:29,540 --> 00:41:33,521 possibly can to lower that risk. 467 00:41:33,521 --> 00:41:45,604 Now it's never gone completely, but the more I can do to limit exposure, not just from a a government, state, city perspective, but also third parties and other parties in that 468 00:41:45,604 --> 00:41:48,115 chain of title, the better off I will be. 469 00:41:49,148 --> 00:41:49,328 Yeah. 470 00:41:49,328 --> 00:42:06,379 W we have uh one that has groundwater and uh it's gone through almost like a generation to get to uh plan that's been approved to do the cleanup and then that is now eighty percent 471 00:42:06,379 --> 00:42:18,063 done and it's just monitoring and then it's so funny to hear people's perspectives on who's in charge of the water board and what's the likelihood that this ever gets an NFA. 472 00:42:18,063 --> 00:42:31,529 And if we were at the horse races uh placing our bets, it's like uh whatever they tell you times four or times five is like where the smart money is on like how long it can take. 473 00:42:31,529 --> 00:42:38,957 And uh we'll hear some people that make it through unscathed and they get it and uh it's so hard to handicap that. 474 00:42:40,011 --> 00:42:42,722 And regulations change and and things go back. 475 00:42:42,722 --> 00:42:52,937 So it's it's hard to to know forever, but the more you can more you can limit it, the more you can you know protect yourself through contract provisions and getting no further 476 00:42:52,937 --> 00:42:57,639 action letters, diligence, put you in the best spot possible. 477 00:42:58,299 --> 00:42:58,769 Yeah. 478 00:42:58,769 --> 00:43:01,729 But I'm gonna end with one that's fun for you, Jeff. 479 00:43:01,729 --> 00:43:02,991 defaults. 480 00:43:03,331 --> 00:43:10,054 So uh playing nice, nasty grams, as Bill had taught me to call them sometimes. 481 00:43:10,114 --> 00:43:20,838 And then uh being very practical about like, you know, are you trying to keep the tenant or are you trying to work through a difficult situation, or are they on their way out, are 482 00:43:20,838 --> 00:43:23,879 they playing nice, are they not playing nice? 483 00:43:23,980 --> 00:43:27,857 And what are some like uh frameworks you have? 484 00:43:27,857 --> 00:43:39,313 like that you keep in mind when you're dealing with people in default, enforcing default, clawing back things from default and just that whole uh dealing with people that are in a 485 00:43:39,313 --> 00:43:42,787 a tough situation or that are not not carrying their weight. 486 00:43:42,902 --> 00:43:43,983 good question. 487 00:43:43,983 --> 00:43:48,086 It comes back to the lawyer also wearing a business hat. 488 00:43:48,267 --> 00:43:52,320 Is we we can send I do like the term nasty grams. 489 00:43:52,320 --> 00:43:54,672 It's you know a very strong demand letter. 490 00:43:54,672 --> 00:43:58,615 Um what does the client what do we actually want? 491 00:43:58,615 --> 00:44:04,300 Do we if if the client or the tenant is a deadbeat and we want them out, then yes, we're gonna be as aggressive as possible. 492 00:44:04,300 --> 00:44:05,721 We're gonna send a nasty gram. 493 00:44:05,721 --> 00:44:11,025 We're gonna work to get them out of the property as quickly and as efficiently as possible. 494 00:44:11,369 --> 00:44:20,716 If their goal is to have a workout, my tenants having a a hard time, or they're just, you know, they're trying to drag their feet, we're gonna take that into account what what 495 00:44:20,716 --> 00:44:25,259 we're sending them or how we're reaching out to a tenant or we're dealing with a settlement. 496 00:44:25,500 --> 00:44:32,364 We have now we we have tenant land we represent the landlord and the tenant can never get their space built out. 497 00:44:32,485 --> 00:44:34,727 and the landlord was was missing rent. 498 00:44:34,727 --> 00:44:38,219 But the underlying issue was a franchiser issue. 499 00:44:38,219 --> 00:44:44,311 where the tenant, the franchiser misled them, the tenant couldn't do it, and we just wanted the space back. 500 00:44:44,371 --> 00:44:52,533 So instead of giving a notice of default and going after the tenant for every single penny, we were able to negotiate a settlement with the tenant. 501 00:44:52,533 --> 00:44:54,573 So the landlord gets a lump sum. 502 00:44:54,694 --> 00:44:59,555 There's no true up, so we're not looking over our shoulder or required to find a new tenant. 503 00:44:59,715 --> 00:45:07,477 And he gets the best of both worlds and the deal almost almost fell apart over about fifteen thousand dollars. 504 00:45:07,477 --> 00:45:10,659 When it was a m several hundred thousand dollars sum. 505 00:45:10,780 --> 00:45:19,232 And that's where we come into and say to the the landlord client, If you want, we can fight about this, but you're gonna have legal fees, you're gonna have risks, you're gonna 506 00:45:19,232 --> 00:45:22,009 have unknowns, you're gonna have collection issues. 507 00:45:22,490 --> 00:45:24,632 Our recommendation would be accept it. 508 00:45:24,632 --> 00:45:33,719 It's a little bit less than you wanted, but you move on, we get you a new tenant, you get your cash flow back, and ultimately we're able to get that deal done because everybody's 509 00:45:33,719 --> 00:45:35,280 gonna act reasonable. 510 00:45:35,481 --> 00:45:36,321 So 511 00:45:36,381 --> 00:45:45,228 Nasty grams have their place, but you also want to make sure that you're thinking about things from a business perspective as well, not just principle. 512 00:45:45,268 --> 00:45:51,803 And that that allows you to get the best deal for the landlord in each sp specific situation. 513 00:45:52,764 --> 00:45:53,214 Yeah. 514 00:45:53,214 --> 00:46:04,478 We did so many of these exchanges of people who got out of industrial, took their proceeds and bought single tenant net lease deals that have operators that are franchisees that had 515 00:46:04,478 --> 00:46:09,620 deals that blew up if they signed a big rent uh during the pandemic. 516 00:46:09,620 --> 00:46:13,962 And so to deal with a lot of those, like that exactly what you're talking about. 517 00:46:13,962 --> 00:46:17,323 I feel like so many people had to deal with so many of those. 518 00:46:17,323 --> 00:46:22,665 It's uh unpleasant and there's rarely anything there. 519 00:46:23,205 --> 00:46:33,626 And then uh franchisors that play nice or that don't, it seems like a lot of those deals blew up and like you ha you do kinda have to lick your wounds and nobody's really 520 00:46:33,626 --> 00:46:34,837 made whole on a 521 00:46:35,670 --> 00:46:42,292 You the one takeaway remember is you know any anyone can file a lawsuit, but it's collecting that matters. 522 00:46:42,346 --> 00:46:44,518 A judgment is not collections. 523 00:46:44,518 --> 00:46:47,511 Those are not the same if people get that confused. 524 00:46:49,294 --> 00:46:49,774 Cool. 525 00:46:49,774 --> 00:46:53,859 Well we best get back to work or we'll have our own judgments here, Jeff. 526 00:46:53,859 --> 00:47:03,659 Yeah, we can't spend all day shooting the breeze, but I do appreciate ya as always spending time and helping bring some clarity and sharing so that other people could learn. 527 00:47:05,828 --> 00:47:07,484 Yeah, stay out of trouble. 528 00:47:07,484 --> 00:47:09,047 I'll catch you later. 529 00:47:09,812 --> 00:47:11,317 Okay, see you later. 530 00:47:11,317 --> 00:47:12,338 Bye-bye.