BUILD-TO-SUIT LEASES:
Build-to-Suit Leases:
tiptoeing Through the Construction Minefield
by
Robert Harms Bliss
I. Defining Build-to-Suit Leases.
"Exactly what is a 'build-to-suit' lease?" Traditionally, a build-to-suit lease is one part lease conveyance and one part construction contract. As the amount of the construction escalates, certain lease provisions change. The amount of construction required by a build-to-suit lease ranges all the way from the petite (remodel of existing space) to the profound (construction of a high rise office building on a ground lease). Set forth below, beginning with the petite, are examples of what could be called a "build-to-suit" lease. The author calls this the "Build-to-Suit Scale" or the "BTS Scale."
1. Refurbish Existing Improvements. The lowest rung on the BTS Scale is illustrated by the negotiations between a landlord of an existing office space for rent "as is" with the tenant, who finally asks, "Won't you at least paint the walls and shampoo the carpet?" When the landlord makes this magnanimous concession, he has technically agreed to "build-to-suit" the expectations of the tenant. Generally, no work letter is involved and there is no adjustment in the rent. These leases usually have terms of one to three years.
2. Remodel Existing Improvements. This type of lease negotiation typically results in the landlord's agreement to move walls, re-carpet and paint the walls. Depending upon the cost of the work to be done, the work may or may not call for a work letter and the cost of the improvements may or may not be rolled into the rent. These leases usually have terms of two to four years.
3. Finish-Out Shell Space in Existing Improvements. "Existing improvements" refers to a completed building shell with interior ready to be finished out for the first time. The typical leased premises in this example are part of a project or building; the tenant is one of many tenants in the building or project. In an office lease, the shell space would be either an entire floor or unfinished space on a portion of a floor in a multi-storied building. In a retail lease, the unfinished shell space might be in an existing building or could be an empty space in a strip center with the interior foundation not yet poured. In an industrial lease, the shell might be part of a strip along a rail head or part of a single standing building where other portions have been leased. The work to be done could be as simple as adding partition walls between demising walls, carpeting and painting or as complex as adding a marble staircase between three floors of an office building. Generally, a lease requiring finish-out in existing improvements calls for a work letter and/or approved plans and specifications. A usual term for leases of this type is three to five years with, perhaps, a renewal option.
4. Construction on Improved Property (Free Standing Building-Single Tenant). Again there are existing improvements, but the building is generally free standing and has a single tenant. The building may be a shell and the build-to-suit lease calls for the landlord or the tenant to finish-out the interior. These leases tend to have more negotiations than the previous examples and the parties may use a construction contract attached to the lease rather than a work letter. Also, these leases tend to be either true triple net leases or double net leases.
5. Construction on Unimproved Property (Free Standing Building-Single Tenant). These are the true build-to-suit leases. A build-to-suit lease on unimproved property almost always involves a free standing building and a single tenant. If there is more than one building, there is still usually only one tenant. The landlord may or may not own the property. Sometimes the lease calls for the landlord to purchase a specific piece of property and construct the required improvements. Under this category, one may see a sale-leaseback or a synthetic lease. These leases are almost always a true "triple net" lease in which the tenant pays directly to the provider all of the utilities, taxes and insurance, not to mention all costs of repairs and replacements. In other words, the utilities, taxes and insurance are "net" to the landlord and they are not included in the rent. True triple net leases are sometimes called "bond leases" because all the landlord does is collect the rent the same as the bond holder clips coupons. If the landlord has an obligation to rebuild the improvement in the event of a casualty, or if the landlord retains control over paying any of the utilities, taxes or insurance (even if the landlord passes through 100 percent of the costs), then these leases are sometimes called a "double net" lease. Sometimes there is no obligation on the part of the landlord to rebuild in the event of a casualty. Leases in this category are usually long term, generally ten to twenty years with up to six five year renewal options at fixed or formulae rates. Tenants generally have an absolute right of assignment, the right to "go dark", and a very broad use clause.
6. Ground Lease. Ground leases are those leases in which the landlord performs no construction. Construction of improvements may not even be required (although the amount of the rent may strongly encourage the tenant to build substantial improvements). Ground leases can be called build-to-suit leases where the construction is done by the tenant because the tenant is either required to build or has strong incentives to build. These leases typically are 50 to 99 year leases requiring the tenant to pay all taxes, utilities, insurance and the cost of any improvements. The rent may be reduced by an agreed upon percentage during the first two years in which the tenant constructs the improvements, but after that, the rent increases whether or not the building is finished. The ground lease is not subordinated to anything; any deed of trust securing the debt for the improvements is inferior to the lease rights of the landlord and the landlord's reversionary interest. Ground leases may or may not require a landlord's prior approval of plans and specifications for the improvements, though typically, in the Trinity Industrial District of Dallas, all plans and specifications must have prior approval of the landlord. Once improvements are placed upon the land, the rent is generally adjusted by taking an agreed upon percentage of the appraised value of the land with improvements. Thereafter, the rent may be adjusted every ten years in the same manner.
II. Build-to-Suit Leases.
A build-to-suit lease contains two agreements: one, a lease agreement; and, two, a construction agreement, usually in the form of a work letter. Set forth below are the lease clauses most affected both in the lease negotiations.
A. Lease Issues.
Depending upon where one is on the BUILD-TO-SUIT Scale, certain lease clauses are affected to varying degrees.
Parties. What could be simpler than the names of the landlord and tenant? When you are at the lower end of the BUILD-TO-SUIT Scale, the fact that the landlord may not actually own the premises may be immaterial. However, at the upper end of the BTS Scale, when tenants like to include a purchase option, a management company that has the authority to lease likely does not have the authority to sell. The purchase option clause will be discussed later.
Description of Leased Premises. Since a lease is a conveyance of real property, the legal description is always important. However, at the higher end of the BUILD-TO-SUIT Scale, it becomes critical. High end BTS Scale leases typically have right of first refusal clauses and purchase options. When this is so, a survey is needed, not to mention a title search.
Term. The higher on the BTS Scale, the longer the term. If substantial construction is required, the term generally slides forward and does not begin until the premises are completed.
Commencement Date. Lease forms have long made a distinction between commencement dates and completion dates. When construction is required, there is an estimated completion date. At some point in the construction process, a determination must be made that the premises are "substantially completed". At this point, the parties generally sign a document converting the completion date into a commencement date causing the term to begin. Determining when the premises are "substantially completed" can entail some detailed lease drafting. For example, the definition of "substantially completed" from a build-to-suit lease for a nationwide distribution center is set out below:
Substantial Completion; Ready for Occupancy.
(a) The Initial Improvements (including, without limitation, the Tenant Finish Work) shall be deemed to have been substantially completed and to be "Ready for Occupancy" when Landlord has completed the Initial Improvements, as certified by the architect preparing the Space Plans utilizing AIA document G704, Certificate of Substantial Completion, and the Initial Improvements are sufficiently complete to permit Tenant to occupy the Property for its intended use, subject only to the Punch List (defined below) and the applicable governmental authority has issued a final certificate of occupancy for the Property or such other approvals required to permit Tenant to occupy the Property. If Tenant and Landlord disagree as to whether the Initial Improvements have been substantially completed, Landlord and Tenant agree that a certificate from an independent architect ("Architect") selected by Landlord and Tenant shall be final and conclusive on that issue.
(b) Within five (5) days after Landlord notifies Tenant that it has completed the Initial Improvements, Tenant, Landlord and Contractor will conduct a walk-through inspection of the Property and the parties will jointly prepare a written punch list ("Punch List") specifying those items which require completion. Landlord shall diligently attempt to complete the items on the Punch List within thirty (30) days thereafter. If the Tenant takes occupancy prior to completion of the Punch List, in no event may Tenant interfere with or delay the completion of the Punch List or the items listed thereon.
(c) If the date the Property is Ready for Occupancy is delayed by reason of any one or more Tenant Delay, the Property shall be deemed Ready for Occupancy for the purposes of determining the Commencement Date on a date determined by taking the date the Property is Ready for Occupancy and counting backwards a number of days equal to the number of days of Tenant Delay (e.g. if there are five (5) days of Tenant Delay and the Property was Ready for Occupancy on March 9th, the Commencement Date would be deemed to be March 4th).
A nationwide retail tenant deals with substantial completion in the following way:
The term "substantial completion" shall mean a duly executed certificate from the Project Architect certifying that the construction of the Leasehold Improvements has been completed in accordance with the Final Plans, subject to minor punch list items, which punch list shall be established as provided below. Tenant, however, reserves the right to make an additional punch list within thirty (30) days after occupancy which shall be submitted to Landlord and Landlord agrees to make repairs required by such punch list as soon as possible, at no additional cost to Tenant. Notwithstanding the foregoing, if after Tenant completes its work in the Premises and is ready to open for business Landlord fails to obtain and deliver to Tenant a copy of a permanent certificate of occupancy for the Premises which permits Tenant to open and operate the business without Tenant's right to remain open being conditioned upon completion by Landlord of any items required by governmental authority in connection with Landlord's construction of the Improvements, then rent shall be abated until a certificate of occupancy without such condition is delivered or Tenant shall be entitled to exercise any other remedies provided under the Lease.
Many times landlords will insist upon a drop dead commencement date where the lease will commence no matter in what stage the improvements happen to be. For example, "Notwithstanding anything to the contrary, this Lease will commence on July 1, 2005, whether the Leased Premises are Substantially Complete or not."
Rent. As a general matter, if the rent is fixed, so are the construction costs; that is, the construction costs are built into the rent and the landlord takes the risk of exceeding the construction allowance. In lower end BUILD-TO-SUIT Scale leases, landlords have a tenant finish-out allowance. If the allowance is exceeded by change orders, the excess cost is either paid directly to the landlord or contractor or is rolled into the rent with an appropriate rate of interest. Needless to say, this is treacherous field for the naive tenant and a fertile ground for drafting with the experienced tenant. If the rent is to be determined per square foot as constructed, there sometime can be a fight to the death over the proper measurement of the total square feet of the finished building. Many long term ground leases that are build-to-suit have provisions providing for an appraisal every few years and the rent is adjusted according to a predetermined percentage.
Taxes. On the low end BUILD-TO-SUIT Scale leases, the taxes are generally paid by the landlord and are either built into the rent (an archaic concept), charged to the tenant as an excess over a calendar year or dollar stop, or passed through to the tenant in its entirety. The higher up the BUILD-TO-SUIT Scale, the more likely the landlord gives up paying and/or protesting taxes.
Use. Again, the higher up the BUILD-TO-SUIT Scale, the broader the use clause for the tenant.
Maintenance and Repair. Build-to-suit leases generally put the entire burden of maintenance, repair and replacement on the tenant. See, for example, the clauses below:
5.01 Landlord Repairs. Landlord shall not be required to maintain or make any improvements, replacements or repairs of any kind or character to the leased premises during the term of this Lease.
5.02 Tenant Repairs. Tenant shall, at its sole cost and expense, maintain, repair and replace all parts of the leased premises in good repair and condition, including, but not limited to, roof, foundation, parking areas, structural soundness of exterior walls, windows, plate glass, doors, heating, ventilating and air conditioning systems, down spouts, fire sprinkler system, dock bumpers, lawn maintenance, pest control and extermination, trash pick-up and removal, and painting the building and exterior doors. . .
5.03 Maintenance Contract. Tenant shall, at its sole cost and expense, during the term of this Lease maintain a regularly scheduled preventative maintenance/service contract with a maintenance contractor for the servicing of all hot water, heating, ventilating and air conditioning systems and equipment upon the leased premises.
Utilities. Generally, in the high end build-to-suit leases, the last obligation of the landlord is to provide utility connections to the premises, except, of course, minor items such as punch lists. After that, the tenant assumes all responsibility. For example:
Landlord shall deliver and maintain all utility services to the Premises adequate for Tenant's needs with connections to the rear, interior of the Premises and separate meters for such utility services, as described in prototype specifications provided by Tenant to Landlord, including but not limited to, those for water, sewage, electricity, and telephone. Landlord shall provide separate sprinkler lines to the Premises. Tenant shall pay for any connection charges at the Premises, security deposits required by such utility companies and charges for use of the utility services.
Damage and Destruction/Duty to Rebuild. A great deal of consideration should be given to the realistic time it would take to rebuild. How realistic is it to move the tenant to temporary space while the rebuilding is taking place. Also, consideration needs to be given to the type of space that will be rebuilt. Is it a high rise office building that took a direct hit from a tornado or a single standing manufacturing facility? In the high end BTS Scale leases, the duty to rebuild and the cost may be on the tenant. Once the lease reaches level five or six on the BUILD-TO-SUIT Scale, the obligation to rebuild becomes one of discretion. As shown below, a nationwide grocery tenant does not require rebuilding.
Obligation to Rebuild. . . . Lessor shall be under no obligation to rebuild, replace, maintain or make any repairs to the leased premises. . . Lessor agrees that lessee may make or permit to be made, such alterations and improvements to the leased premises as lessee may deem desirable for the use thereof and may, at lessee's option and without cost to lessor, at any time and from time to time during the original lease term, or during any option period hereinafter provided for, do any one or more of the following: (1) Alter or remodel. . . (2) . . . addition . . . (3) raze. . . At the expiration or termination of this lease, or any extension or renewal thereof, lessee shall leave the leased premises in good condition, allowance being made for ordinary wear and tear and damage by fire, or by earthquake, or by the elements, excepted, and lessee shall not be required to restore the leased premises to the condition in which the leased premises are in as of the commencement of the term hereof. . .
Assignment and Subletting. Once the lease reaches level four or five on the BTS Scale, the tenant usually has an absolute right of assignment. For example: "Tenant may assign this Lease or sublet all or any portion of the Premises for any lawful use." This is a far cry from a typical retail lease. The right to assign without landlord's approval can have profound and even moribund consequences as illustrated by the case of Neiman-Marcus Company v. Hexter, 412 S.W.2d 915 (Tex. Civ. App. -- Dallas 1967, writ ref'd, n.r.e.), discussed below.
Subordination, Non-Disturbance and Attornment. Only at the highest end of the BTS Scale does the lease not become subordinated to the lender. See, for example, a 99 year lease provision set forth below.
No Encumbrances. Lessee shall have no authority . . . to create or place any lien or encumbrance . . . upon . . . the interest of Lessor . . . Nothing herein contained shall preclude or prevent the Lessee from creating mortgage or deed of trust liens upon the leasehold estate, as more fully provided in Section Eight .
There is a second tier of ground leases with the landlord's obligation to construct (generally between twenty and fifty years) which have the exact opposite goal; the ground lease is drafted from a viewpoint of making it "finance-able" to the tenant's lender.
Default. The higher up the BUILD-TO-SUIT Scale, the harder it is to put the tenant in default. The default clause from a nationwide grocery chain lease appears to be the all time champ.
Lessee's Default. In case lessee shall default in the performance of any covenant or agreement herein contained, and such default shall continue for thirty (30) days after receipt by lessee of written notice thereof given by lessor or the agent or attorney of lessor, then lessor, at the option of lessor, may declare said term ended. . . In case lessor shall default in the performance of any covenant or agreement herein contained, and such default shall continue for thirty (30) days after receipt by lessor of written notice thereof given by lessee, it agent or attorney, then no rent shall be paid or become payable under this lease for such time as such default shall continue after the expiration of said thirty (30) days period and lessee, at its option, may (1) declare the term ended and vacate the leased premises and be relieved from all further obligation under this lease, or (2) pay any sum necessary to perform any obligation of lessor hereunder, and deduct the cost thereof, with interest, from the rents thereafter to become due hereunder. The performance of each and every agreement herein contained on the part of lessor shall be a condition precedent to the right of lessor to collect rent hereunder or to enforce this lease as against lessee.
Surrender. A great deal of thought should be given to what obligations the tenant has at the end of the lease term to remove improvements. Does the bank have the obligation to remove the vault? Does the printing company have the obligation to remove several tons of obsolete printing presses?
Force Majeure. In most leases, no one gives much thought to a force majeure clause. However, in the higher end build-to-suit leases, the clause could become a hidden bomb because it may contain a definition that affects construction delays in ways never imagined by the unwary lease drafter. In some leases, the definition of force majeure may be unrecognizable from the original concept. It may be that the landlord thinks a force majeure is an unexpected price hike in the cost of concrete. Be careful of the definition in the lease.
Work Letters. Work letters should, at least, cover the following issues: (a) A description of the work to be done in sufficient detail. (b) A process for resolving disputes, particularly how to determine who is responsible for the delay. (c) Appointment of representatives. Landlord and tenant should have designated representatives for both the design process and the construction process. (d) A schedule of timetable for approving each step of the design process leading to the "final plans." (e) Designating responsibility for who obtains approvals from governmental entities. (f) Detailing tenant finish-out allowances. (g) A procedure for the bidding process. (h) A methodology for determining the cost of construction. A more detailed discussion of work letters is set forth below.
Purchase Options and Rights of First Refusal. High end build-to-suit leases generally have purchase options. Here it is critical to have the actual owner sign off on the agreement. A sample clause is set forth below.
Provided Tenant is not then in default of the Lease, Tenant or its assigns shall have a continuing right to purchase the Property, or the Property and the Expansion Land (the "Purchase Option") for the period not exceeding the twenty fourth (24th) month of the Lease Term ("Option Period"). The parties shall execute a purchase and sale agreement ("Purchase Agreement") to be prepared by Landlord's counsel within ten (10) days of Landlord's receipt of Tenant's written notice exercising the Purchase Option. The Purchase Agreement shall be in the form set forth as Exhibit "D", attached hereto and made a part hereof. Notwithstanding anything contained herein to the contrary, in the event the Tenant exercises the option to purchase the Property prior to the expiration of the Option Period but does not exercise the option to purchase the Expansion Land, Tenant's option to purchase the Expansion Land shall continue not withstanding the termination or merger of this Lease, and be exercisable by Tenant until the Option Period ends. If Tenant exercises the option to purchase the Expansion Land after purchasing the Property, the parties shall execute the Purchase Agreement; however, the "Property" as defined therein shall only be the Expansion Land and the Purchase Price shall be $1.50 per square foot of Net Land Area, as defined in the Purchase Agreement.
If Landlord receives a bona fide written proposal (the "Proposal") from a third party other than a person or entity affiliated with Landlord or owned or controlled, directly or indirectly, (a "Bona Fide Third Party") or from any person or entity affiliated with Landlord or owned or controlled, directly or indirectly by Landlord (an "Affiliated Party") for the purchase of the Property which Landlord is willing to accept, then Landlord shall give written notice thereof to Tenant ("Landlord's Purchase Option Notice"). Landlord's Purchase Option Notice shall contain the material provisions of the Proposal and identify the offering party. Tenant shall notify Landlord within five (5) days after Landlord's delivery of Landlord's Purchase Option Notice whether Tenant elects to exercise its right to purchase the Property on the same terms as the Proposal. If the offer to purchase the Property is from a Bona Fide Third Party and Tenant fails to notify Landlord within said five (5) day period of Tenant's election to exercise its right to purchase the Property, Tenant shall be deemed to have waived its right to exercise its right to purchase the Property, or the Property and Expansion Land and Landlord shall be free to sell the Property on the terms and conditions to the offering party based on their Proposal. If the offer to purchase is from an Affiliated Party, and Tenant fails to exercise its right to purchase the Property within said five day period, Landlord shall be free to sell the Property on the terms and conditions to the offering party based on their proposal; however, the Property shall continue to be subject to Tenant's rights to purchase the Property pursuant to this Section 16.02. If the sale by Landlord pursuant to the Purchase Option Notice is not consummated in accordance with the terms thereof, the Property shall again be subject to the provisions of this Section 16.02. In no event shall a sale of the Property at foreclosure be subject to the terms of the Right of First Refusal as set forth in this Section 16.02. If Tenant exercises its right to purchase the Property, then within ten (10) days after Tenant's exercise hereof, Landlord and Tenant shall enter into a purchase and sale agreement for the Property on the terms of the Proposal in the form set forth in Exhibit "D". Tenant's rights in this Section 16.02 shall be subject to Tenant not being in default of the Lease. The term "Property" as used in this Section 16.02 shall mean the land and improvements currently under lease; however, if Tenant has exercised its option to expand the Lease under Section 18.01, then the term "Property" includes the land and improvements covered by the expanded Lease.
If the landlord is not the owner, the author suggests an Option to Purchase Real Estate between the tenant and the true owner in a recordable form.
Memorandum of Lease. An option to purchase requires a memorandum of lease for recording purposes.
Renewal Options. When the tenant is strong enough, the renewal options in a build-to-suit lease may exceed the original term. For example, a nationwide grocery chain uses the following renewal option on a twenty year lease:
Renewal Options. Lessor hereby grants to lease, the right at lessee's option, to extend the term of this lease for seven (7) separate and additional periods of five (5) years...at an annual rental payable in equal monthly installments equivalent to three per cent of $____________ . . . upon the terms (other than length of term and monthly rental) herein specified . . . but that this lease will remain in full force and effect, changed only as to the matters specified in this article, and except that lessee may, on the giving to lessor of a six (6) months written notice, cancel any option term in effect.
Landlord's Obligation to Purchase Realty. When the landlord is required to purchase the real property for the build-to-suit lease, the landlord needs extra protection in the event of a default prior to construction. The clauses set forth below show how one developer has handled the problem.
Default Prior to Completion: Condition Precedent. Tenant acknowledges that as of the date of the execution of this Lease, Landlord does not have title to the leased premises. Tenant agrees, as a condition precedent, that all of Landlord's obligations under this Lease, including the obligation to construct the building and improvements to be situated on the leased premises, are contingent upon Landlord acquiring title to the leased premises on terms and conditions which are, in the sole and absolute discretion of Landlord, acceptable to Landlord.
Default Prior to Completion: Damages. Tenant acknowledges and agrees (1) that Landlord would not purchase the leased premises and construct the improvements thereon except for Tenant's agreement to occupy the leased premises pursuant to this Lease and to pay the rent provided herein, (2) that the improvements to be constructed on the leased premises have been designed by Tenant for its own particular and unique use, and (3) that the leased premises are not suitable for use by other tenants in general. Therefore, if Tenant breaches this Lease prior to substantial completion of the improvements to be constructed by Landlord, Tenant shall pay to Landlord, as damages, all soft and hard costs (excluding the cost of the land) related to the construction of the improvements situated on the leased premises including, without limitation, the following costs: interest on any construction loan; architects, engineers, contractors, brokers, developers and other fees; labor and materials; insurance; security; landscaping; building permits and general overhead and expense of Landlord. If Tenant breaches this Lease prior to substantial completion of the improvements to be constructed by Landlord, Landlord may elect, in its sole and absolute discretion, to complete construction according to the final plans and specifications (or plans and specifications as modified by Landlord, in its sole and absolute discretion), and, in such event Tenant's damages shall be limited to Landlord's soft and hard costs incurred as of the date of Tenant's breach.
B. Construction Issues.
The work letter is basically an abbreviated construction contract. As set forth above, work letters should, at least, cover the following issues: (a) A description of the work to be done in sufficient detail. (b) A process for resolving disputes, particularly how to determine who is responsible for the delay. (c) Appointment of representatives. Landlord and tenant should have designated representatives for both the design process and the construction process. (d) A schedule of timetable for approving each step of the design process leading to the "final plans." (e) Designating responsibility for who obtains approvals from governmental entities. (f) Detailing tenant finish-out allowances. (g) A procedure for the bidding process. (h) A methodology for determining the cost of construction. Listed below is a list of work letter clauses that need to be considered in a build-to-suit lease.
Description of Work. There should be a detailed description of the landlord's construction duties and tenant's approval requirement concerning the premises to be built. Generally, the lease negotiation process is started by the tenant's specifications being submitted to the landlord's space planners and architects. The tenant and its advisors are in the best position to start the design process. A "Tenant's Specifications" list should be created by tenant's advisors, be they space planners or architects, and the list should be Exhibit A to the work letter. An example of a specification list for a nationwide distribution center is set forth in Appendix C. Sometimes, tenants will have their own "Prototypical Plans" as set forth in Appendix A.
Representatives. The appointment of representatives is critical to both the design process and the construction process. The design process is an excellent opportunity for party with cold feet or buyer's regret to torpedo the lease. See, for example, the Texas Supreme Court case of Austin Hill Country Realty, Inc., et al v. Palisades Plaza, Inc., 948 S.W.2d 293 (Tex. 1997). It is this author's opinion that representatives are most important to the design process.
Design Phase Schedule. This topic wins the award for being the most fought over, most edited and most rewritten clause in the work letter. And with good reason. If either party is going to kill the deal, this is the place to do it. Generally, the design phase clause is concerned with five phases: (a) receipt of the specifications from the tenant; (b) drawing of space plans, (c) drawing of "final plans", (d) tenant's acceptance of "final plans", and, of course, (e) the approval process at each step of the design phase by the representatives. An example is set forth below:
Landlord, at its sole cost and expense, shall be responsible for providing the design and construction of the Property and the Tenant Finish Work (as defined below), as shown on Landlord's construction documents for the Property, and the adjoining site work, and they are together referred to as the "Initial Improvements", and the plans associated therewith referred to as the "Space Plans". Landlord shall, within five (5) business days after the date hereof, provide to Tenant the Space Plans necessary to construct the shell building, all parking lots, landscaping and common areas incident or appurtenant thereto, including, to the extent not previously completed, any landscaping and entryway features into the Property, The Space Plans will be prepared by Landlord's Architects. The Space Plans will contain construction drawings, plans, documents and mechanical, electrical, and plumbing drawings necessary to construct the Tenant Finish Work. The Space Plans will include locations and complete dimensions and the Initial Improvements, as shown on the Space Plans, shall comply with all applicable laws, ordinances, rules and regulations of all governmental authorities having jurisdiction, and all applicable insurance regulations. Tenant shall either approve the Space Plans or submit, in writing, exceptions to the Space Plans to Landlord within five (5) business days of Tenant's receipt of the Space Plans. If Tenant submits exceptions to the Space Plans, Landlord shall respond to any of Tenant's exceptions within five (5) business days of receipt. This procedure shall be repeated until both parties agree upon the Space Plans, which shall occur no later than sixty (60) days after the first submittal by Landlord. If Tenant takes more than five (5) business days to respond to Space Plans submitted by Landlord, each business day beyond the five (5) business day period shall constitute a Tenant Delay. After approval of the Space Plans, no further changes may be made without the prior written approval of Tenant. Tenant hereby acknowledges that any changes to the Space Plans requested by Tenant after final approval thereof shall constitute Tenant Delays (as defined below), except as provided below.
A design phase clause from a gorilla retail tenant is set forth in section 2.01 of Appendix A.
Tenant Finish-out Allowance. If there is a tenant improvement allowance, it needs to be spelled out in the work letter.
Construction Phase Schedule. This clause generally names the contractor and delineates the construction schedule. A construction schedule is set forth in section 2.03 of Appendix A.
Delays. Delays in the construction schedule generally have penalties attached to each day. Sometimes, the parties speak of "Excusable Delays" or, if the landlord/contractor has penalties past dates certain,"Tenant Delays."
Excusable Delay. The term "excusable delay" shall mean events beyond the Project Contractor's or Landlord's control including acts of God, war, civil commotion, strikes, fire, flood, earthquake or other casualty, governmental regulation or restriction and abnormally adverse weather conditions. Financial inability or lack of funds shall not be an event beyond any party's control and shall not constitute an Excusable Delay. In the event of an Excusable Delay, Landlord shall not be penalized under Section 2.03 above.
Tenant Delay. A "Tenant Delay" shall be a delay resulting from any act, delay, neglect, failure or omission of Tenant, its agents, servants, employees, contractors, or subcontractors, including, without limitation, any delays (a) resulting from a change by Tenant in the Space Plans, (b) in the performance or completion of any work in the Property by Tenant or any person, firm, or corporation employed by Tenant, or (c) caused by Tenant's request for materials, components, finishes, or improvements which are not available in a commercially reasonable time given the anticipated date of Substantial Completion of the Initial Improvements as set forth herein.
The concept of commercial reasonableness comes from the Uniform Commercial Code and all dirt lawyers know that the UCC does not apply to real property transactions. Maybe not. If the lease drafter hangs his hat on a reasonableness concept, he is buying a fact question that will eventually be answered by a jury two or three years after the dispute. Also, a court, by borrowing from the UCC, may give the reasonableness concept much more structure than the drafter bargained for. For example, see the case of Aycock v. Vantage Management Company, 554 S.W.2d 235 (Tex. Civ. App. -- Dallas 1977, writ ref'd, n.r.e.), discussed below.
Force Majeure. Force Majeure is discussed above in the Lease Issues section at Section 15.
Construction Costs. The parties need to determine in advance the definition of what items are included in the cost of construction, particularly if the rent is based upon construction costs. See, for example, how a build-to-suit distribution center lease handled the issue.
The annual base rental rate for the Expansion Space for the remainder of the initial term shall be calculated based on a 9.5% yield on the purchase price of the land in the amount of $1.50 per square foot, soft costs (including but not limited to architectural fees, engineering fees, architectural and engineering reimbursable expenses, interior design fees, civil engineering costs, permits and fees, testing and inspection, environmental phase 1 study, real estate taxes, insurance, project manager fees, development fees, legal fees and accounting fees, and hard costs including but not limited to the shell of the building, parking, tenant improvements, demolition, site work and landscaping, additional paving, technology and security costs, backup power and generation and contractor fees. The annual rental rate for the building for the remainder of the initial term (as extended to allow a minimum five (5) year term as above provided) shall be as set forth in the Lease for the initial term of the Lease. The rental rate for the Expansion Space during any extension options selected by Tenant shall be equal to the Base Rent per square foot of the Building determined as provided in Article 17 of this Lease. The commencement date of the Expansion Space shall be upon Substantial Completion of the Expansion Space ("Expansion Space Commencement Date").
Drop Dead Dates. Critical dates need to be defined such as an absolute move-in date or commencement date.
Change Orders. A strict change order procedure is essential to the work letter.
Liquidated Damages. Since damages are hard to prove in construction litigation (everything is a fact question), the parties usually try to set liquidated damages for breaches at various points of the design and construction phases.
Right to Terminate. The parties normally have a right to terminate upon the other party's breach. Many times the right to terminate is linked to liquidated damages.
Covenants of Landlord Regarding Construction. The work letter usually has covenants of the landlord covering (a) Standards of Construction, (b) Progress Meetings, (c) Inspections, (d) Separate Contracts and (e) Cooperation with Tenant's Contractors.
Construction Forms
III. Construction Forms.
Appendix A is a Construction Agreement that is attached to the retail lease of a large, nationwide retailer that typically has a free standing building as part of a larger shopping center. The tenant has great control over the plans and specifications, but the landlord is responsible for the construction.
Appendix B is the Work Letter for Tenant Improvements in the Texas Real Estate Forms Manual. Obviously, the Work Letter is for leases lower on the BUILD-TO-SUIT Scale; that is, leases with lesser construction than that contemplated by the large retail tenant in Appendix A.
Appendix C is a Specification List Exhibit to Work Letter.
IV. Tales From the Crypt (Selected Cases on Things That Can Go Wrong in Build-to-Suit Leases.
A. Who's On First? Larry, Curley or Moe? Austin Hill Country Realty, Inc. v. Palisades Plaza, Inc., 948 S.W.2d 293 (Tex. 1997). This case illustrates how easy it is for the tenant to "kill the deal" in a build-to-suit lease by not approving the plans and specifications. Construction came to a halt when the landlord received conflicting instructions about the tenant finish-out from different principals of the tenant. The tenant refused to designate a representative to deal with the landlord.
B. I Can't Believe I Gave Away the Ranch! Neiman-Marcus Company v. Hexter, 412 S.W.2d 915 (Tex. Civ. App. -- Dallas 1967, writ ref'd, n.r.e.). This is the ultimate case illustrating the horrors that can befall the landlord when the demand of the gorilla tenant is met in the assignment clause of a build-to-suit lease. In the late 1940's, Preston Center Shopping Center in North Dallas was being developed and the developer wanted the crown jewel of anchor tenants, Neiman-Marcus, who, at that time, only had one location in downtown Dallas. The landlord leased (actually, subleased) to Neiman-Marcus for a term of 25 years with a 25 year renewal option. There was no percentage rent and Neiman-Marcus constructed its own building. The lease had no covenant of continuous operations. The tenant had the right to assign without the consent of the landlord and the assignment would relieve Neiman-Marcus of liability. So much for the minor concessions made to the tenant. The lease contained a paragraph severely restricting the landlord's right to lease to other tenants in the shopping center without the prior, written consent of the tenant. Landlord agreed (1) that it would not lease to certain types of businesses; (2) that it would not lease to certain types of mercantile establishments from outside the City of Dallas (read: New York) and certain specialty stores (also named in the lease) without the prior written consent of tenant; (3) that it would not lease to former employees of Neiman-Marcus; and (4) that it would not lease to any tenants with a name even remotely similar to Neiman-Marcus. Fifteen years into the lease, along comes Ray Nasher, who just happens to have a competing shopping center two miles to the east called Northpark Shopping Center. Neiman-Marcus assigns its Preston Center lease to Nasher and signs a new lease with Northpark. Ray Nasher is now the new tenant and is in the position to approve or disapprove virtually every new tenant in Preston Center. Needless to say, Preston Center was not happy with having its competitor as a partner with veto power over new tenants. The landlord brought suit for a declaratory judgment arguing that the restrictive covenants in their lease with Neiman-Marcus (now Ray Nasher) violated the anti-trust laws of the State of Texas. The Dallas Court of Civil Appeals held the restrictive covenants did not violate the anti-trust laws and that the landlord were bound by the lease they signed after negotiating the terms on the open market. Ray Nasher, as assignee and the new tenant, had the right to enforce all rights of the tenant under the lease.
C. They Didn't Do What They Said They Would Do! Regency Advantage Limited Partnership v. The Bingo Idea-Watauga, Inc., 936 S.W.2d 275 (Tex. 1996). Landlord agreed to a build-to-suit lease for the tenant and that they would construct the improvements within so many days of tenant's obtaining a license. Tenant obtained the license, but landlord declined to construct. The landlord assigned the lease and tenant sued the assignee, the new landlord, for breach of the lease. Failure to construct is a one time breach which took place prior to the assignment; therefore, the tenant had a cause of action against the original landlord, but not the assignee.
D. But I Couldn't Borrow the Money! Kleiman v. White, 476 S.W.2d 375 (Tex. Civ. App. -- Austin 1972, writ ref'd. n.r.e.). The build-to-suit lease was contingent upon the landlord obtaining "reasonable financing". Landlord opted to kill the deal by not being able to obtain 100 per cent financing. Also, there was no drop dead date for the completion of the improvements, none of which had been constructed. The court held that the landlord breached the lease by not obtaining reasonable financing and that a reasonable time for substantial completion would be implied.
E. Exclusive Means Exclusive. Butts v. Somers, 441 S.W.2d 288 (Tex. Civ. App. -- El Paso 1969, no writ). The granting by the landlord of an exclusive to the tenant in a build-to-suit lease for "drive in café business" was enforced against the landlord who sought to build a "café".
F. It Takes a Village. Minzer v. First National Bank in Dallas, 390 S.W.2d 784 (Tex. Civ. App. -- Dallas 1965, writ ref'd n.r.e.). The tenant "blocked up" an entire city block with ground leases. On one of the 99 year leases, the tenant razed the building and constructed a fifty story banking house. After completion, the landlord sued for cancellation of the lease alleging common law waste. The tenant's completed fifty story building connected with tenant existing building on numerous floors. The landlord said the tenant had the right to raze and build another building, but not one building over other landlord's ground leases. The lease gave the tenant the right to raze and construct "buildings, building, or part thereof". The landlord cited several cases dealing with the doctrine of common law waste where tenants lease a contiguous building from a different landlord and then try to connect the buildings. The court sided with the tenant, holding that the bank had the express right to construct part of a building on the leased premises.
G. Time of the Essence? Foster v. L. M. S. Development Co., 346 S.W.2d 387 (Tex. Civ. App. -- Dallas 1961, writ re'f n.r.e.). A 99 year ground lease required the tenant to either invest a certain amount of money into the existing building or to raze it and begin construction of a new building by a certain date. Tenant failed on both counts, but did block up a city block and construct the Mercantile Dallas Building some two years late. After the permanent financing was closed, the landlord sought to cancel the lease and take possession of the building. The court held that the tenant's obligation to either put money or improvements by a certain date was a covenant and not a condition which would allow the landlord to cancel the lease. The remedy of the landlord was to sue for damages. The 99 year lease did not say that time was of the essence.
H. Don't Tell Me "Reasonableness" has Meaning; I Drafted This Document!" Aycock v. Vantage Management Company, 554 S.W.2d 235 (Tex. Civ. App. -- Dallas 1977, writ ref'd, n.r.e.). This case deals with the "standard of reasonableness". Tenant had the right to renew based upon then prevailing rental rates for properties of equivalent quality, size, utility and location, with the length of the lease term and credit standing of the tenant to be taken into account. Tenant tried to exercise the renewal option and the landlord refused to quote a rental for the renewed term because the option was unenforceable as an agreement to agree (unspecified rental for the new term). The Dallas Court of Civil Appeals reversed the trial court and held that the renewal option was enforceable because it contained "a sufficiently definite standard by which the rental may be determined." 554 S.W.2d at 236. Chief Justice Guittard wrote in the opinion that a guide to good faith and reasonableness could be found in the Uniform Commercial Code. Chief Justice Guittard wrote as follows:
We conclude that a contract is sufficiently definite for enforcement, although the performance of one of the parties is to be measured by a standard of reasonableness, if the contract expressly so provides, and that this principle applies to the matter of monetary compensation when the parties have agreed to be bound by that standard. ... [A]ll contracts have some degree of indefiniteness and uncertainty, but that people should be held to the promises they make and that if gaps are filled in accordance with what the parties have said, the result is more just to both than would be a refusal of enforcement. . . . This principle . . . has been adopted with respect to sales of goods in the Uniform Commercial Code, which provides that the parties may be bound by a contract which fails to specify the price if they so intend, and if they later fail to agree on the price, it is a reasonable price at the time of delivery. Tex. Bus. & Comm. Code Ann. §2.305(a) (Vernon 1968). Although this section is not by the terms of the Code applicable to a lease of real estate, we regard the principle as sound and see no reason why it should not apply here.
554 S.W.2d at 237. Although chapter one of the Uniform Commercial Code makes it clear that the UCC does not purport to deal with real property and section 9-109(d)(11) of Revised Article 9 excludes transfers of interest in real estate, it has been the writer's experience that appellate judges have a proclivity for borrowing the logic from the UCC and applying it to real property transactions. The doctrines of "commercial reasonableness" and a duty of "good faith" in the performance of contracts may work their way into the current right of landlords to refuse to consent arbitrarily to assignments and sublettings. See, e.g., Tex. Bus. & Comm. Code Ann. §§1.102(c) and 1.203.
V. Selected Build-to-Suit lease Clauses.
A. Nationwide Retail Tenant Build-To-Suit Lease Clauses.
ARTICLE 8: USE
8.1 Tenant shall have the exclusive right to use the Premises for the sale, rental and servicing of:
(1) computer hardware and related products and accessories;
(2) general office business equipment and supplies;
(3) multi-media electronics products and equipment; including interactive equipment;
(4) telecommunications products and equipment;
(5) consumer electronics products and equipment;
(6) audio, video and game hardware and software, compact discs, laser discs, digital hardware and software;
(7) books, magazines and periodicals in any existing or future format; and for other hardware, software, products and accessories, including without limitation those for sending, receiving, viewing and playback and those created by changing technologies related to categories (1) - (7); for training in the use and operation of computer hardware and software and other products set forth above; for performance of on-site or off-site technical services relating to the foregoing products and equipment; and for telemarketing purposes. In addition, Tenant shall have the right to use the Premises for any other lawful purpose, subject only to any exclusive use granted prior to the Date of this Lease to another tenant in the Shopping Center pursuant to the express terms of a lease agreement between Landlord and such tenant. Landlord warrants and represents that there are no exclusive uses or restrictions on Tenant's use in effect as of the Date of this Lease except those expressly set forth on Exhibit "F" to this Lease. Tenant shall have the right to change its trade name from time to time.
8.5 Tenant shall have the right to cease operating in and/or vacate the Premises, which shall not be a default under this Lease. Nothing herein shall be construed to create any obligation on the part of Tenant to open the Premises for business or to operate in the Premises for any period of time. In the event Tenant elects to cease operating in and/or vacate the Premises, it shall notify Landlord thirty (30) days prior to ceasing operations and/or vacating the Premises. Tenant shall, however, continue to be liable for Rent under this Lease. Any time after Tenant has vacated the Premises for a period of six (6) months or more, unless due to acts or omissions of Landlord, casualty, condemnation, Unavoidable Delay or remodeling of the Premises, Landlord may terminate this Lease by giving sixty (60) days prior written notice of such termination ("Termination Notice") to Tenant. Upon Tenant's receipt of the Termination Notice, this Lease shall expire on the sixtieth (60th) day thereafter and all liability and obligations of Landlord and Tenant under this Lease shall expire as of such date, except those expressly surviving the termination of this Lease. Notwithstanding the foregoing, if Tenant assigns or sublets the Premises pursuant to Article 10 of this Lease at any time during the period after such vacancy but before receipt of Landlord's Termination Notice, then Landlord shall not have the right to terminate this Lease pursuant to this Section. Notwithstanding any vacation of the Premises by Tenant, Tenant may resume occupancy and operation of the Premises at any time prior to receipt of a Termination Notice from Landlord.
ARTICLE 9: EXCLUSIVE USES; RESTRICTIONS ON LANDLORD
9.1 Landlord covenants, warrants and represents that during the Term of this Lease Landlord shall not:
(a) lease, rent, occupy, use or permit to be occupied or used by any person or entity other than Tenant any part of the Shopping Center or any property contiguous or adjacent to the Shopping Center owned or leased by Landlord or an affiliate of Landlord, directly or indirectly, (which shall include any property that would be contiguous or adjacent but for an intervening road, street or accessory or the like) for the sale, rental or servicing of computer hardware, software and related products and accessories, the sale, rental or servicing of multi-media electronics and telecommunications and related products and accessories, and/or for training in the use and operation of computer hardware and software usage; or
(b) lease, rent, occupy, use or permit to be occupied or used by any person or entity any part of the Shopping Center, except as may be expressly permitted under leases existing on the Date of this Lease, for any of the following purposes:
(1) (i) the operation of an amusement center, entertainment facility, bingo or game parlor, billiards parlor, bowling alley, skating rink or similar establishment, (ii) live theater, movie theater or similar establishment, (iii) sports facility, karate, gymnasium, or other exercise facility, health spa or health club, (iv) central laundry, dry cleaning plant, coin operated laundry, (v) medical clinic, animal clinic or similar establishment, (vi) funeral parlor, off-track betting establishment, (vii) car wash, automobile dealership or showroom, sale, display, rental, leasing, repair or storage of or parts facility for, motor vehicles, boats, trucks, trailers, recreational vehicles, mobile homes or other vehicles, (viii) flea market, massage parlor, adult book store, adult movie theater or other sexually oriented shops; or (ix) night club, ballroom, dance hall, discotheque, cocktail lounge, bar or tavern, banquet facility and similar types of establishments;
(2) the operation of a restaurant if located within 250 linear feet of the nearest corner of the Premises. . .
(3) the operation of an office, except incidental to the operation of a retail business;
(4) industrial, assembly or manufacturing plant . . .
(5) the operation of a business which creates a nuisance; or
(c) engage or permit any activity in the Shopping Center which violates a law, ordinance or other governmental regulation, or otherwise discourages customers from patronizing tenants of the Shopping Center.
Landlord covenants and agrees that the restrictions set forth in this Section 9.1 shall constitute covenants running with the land . . . Landlord acknowledges that in the event of a violation of breach of any of these restrictions, Tenant shall be entitled to exercise its remedies under this Lease and, without any further notice, at Tenant's option, to cancel this Lease, to continue this Lease but pay one-half Rent until such breach or violation is cured . . .
ARTICLE 10: ASSIGNMENT
10.1 Tenant may assign this Lease or sublet all or any portion of the Premises for any lawful use . . .
ARTICLE 12: REPAIRS
12.1 Landlord shall, throughout this Lease Term and at its sole cost and expense, maintain and repair in good condition and make all replacements to, the exterior of the building, the roof system, foundation system, exterior walls and structural portions of the building in which the Premises are located, including without limitation gutters and down spouts, sprinkler system, all electrical, gas, sewage and water lines and conduit to the point of connection at the rear, interior of the Premises or permanently embedded in the walls, ceiling or foundation of the Premises or serving parts of the Shopping Center in addition to the Premises. Landlord shall make all replacements and repairs to the Premises covered under contractor's, manufacturer's, vendor's or insurer's warranties which are not assignable to Tenant under the provisions of Section 12.2. Landlord expressly warrants the good condition and operation of, and shall maintain, repair and make all replacements to, the heating, venting and air conditioning system ("HVAC") serving the Premises for a period of twelve (12) months from the Commencement Date. Subject to the waiver of subrogation provisions set forth in Section 15.5, repairs of any of the foregoing which are the result of Tenant's, or its agent's, contractor's or employee's, negligence or misconduct shall be made at Tenant's sole cost and expense. Landlord shall at Landlord's sole cost and expense (I) paint those portions of the exterior of the building in which the Premises are located which are painted and power wash or clean, as applicable, the remaining exterior when necessary, but in no event less than once every five (5) years and (ii) remove any graffiti on or other defacement to the exterior walls of the Premises.
12.2 Tenant shall repair and maintain in good condition the interior of the Premises, and windows, plate glass, glass doors, and the HVAC on the roof of the Premises (after the expiration of Landlord's twelve (12) month obligation set forth in Section 12.1 above), but excluding repairs due to fire or other casualty, condemnation or the negligence or misconduct of Landlord, its agents, contractors or employees, or repairs required as a result of the failure of Landlord to maintain or repair any part of the building or other improvements as specified in Section 12.1 above or as a result (I) of failure of Landlord or its architects, contractors or consultants to comply with applicable Regulations in the design or construction of the Premises or the Building in which the Premises is situated, or (ii) defects in the design or construction of the Premises or such Building, all of which Landlord shall correct or repair at its sole cost and expense. Landlord agrees to assign to Tenant all warranties received in connection with the construction of the Premises or, if any warranty is not assignable, Landlord agrees to enforce such warranty on behalf of Tenant.
12.3 Any repair, alteration, addition or improvement of a structural nature to the Premises (other than with respect to any such work performed by Tenant pursuant to Section 13.1 below) or to the exterior of the Premises or Common Area, or any part thereof, which may be necessary or required by reason of any Regulation shall be immediately made by and at the cost and expense of Landlord.
B. Nationwide Grocery Store Build-To-Suit Lease Clauses.
Term. To have and to hold the above described premises, together with the contents, hereditaments, appurtenances and easements there unto belonging, at the rental and upon the terms and conditions herein stated for an original term of 20 years, commencing with the first day of _________, 20**, and extending to and including the last day of _________, 20**.
Utilities and Taxes. Lessee agrees that it will pay all charges for electricity, water, gas, telephone and other utility service used on the leased premises. Lessee further agrees to pay all taxes and assessments upon the leased premises which are payable during the original lease term or any renewal thereof.
Alterations. Lessee may place or install on and/or in the leased premises and such fixtures and equipment as it shall deem desirable for the conduct of business therein, and may paint the building improvements such colors as it elects. Lessee shall have the exclusive right to paint and erect or authorize signs in and over the leased premises and on the outside of the building improvements thereon. Personal property, fixtures and equipment used in the conduct of lessee's business . . . shall not become a part of the realty, . but shall retain their status as personalty and may be removed by lessee at any time.
Assignment. Lessee shall have the right to assign or transfer this lease or to under lease or sublet the whole or any part of said leased premises. Should lessee assign this lease it shall nevertheless remain liable to lessor for full payment of the rent and lessee's other obligations under this lease.
Insurance. Lessee agrees that it will, during the original term hereof, or any renewal thereof, at its expense, keep in effect upon the leased premises, fire insurance with extended coverage endorsement,...eighty per cent of the insurable value of the building improvements...
Lessee's Right to Terminate. Lessor agrees that lessee may...at the option of lessee, terminate this lease at any time during the original term hereof provided lessee intends to cease grocery supermarket operations on the leased premises. In the event lessee desires to exercise this option and to terminate this lease, it shall give written notice to lessor of its premises from lessor. . . In the event lessor elects to accept said offer to purchase, . . . Should written notice of the acceptance of lessee's offer to purchase. . . not be received by lessee . . . then . . . this lease shall terminate and end . . . All parties hereto shall be discharged from further liability . . .
Lessor's Right to Inspect. Lessor reserves the right to enter upon the leased premises during business hours at any time to inspect the same or to make such repairs al lessor may deem advisable (even though the same may not be required by this lease), or for the purpose of exhibiting the same to persons wishing to purchase the same.
Appendix A: Construction Agreement for Nationwide Retail Tenant
This Construction Agreement is attached to and made a part of the Lease between Landlord and Tenant. In the event of a conflict between any provision of the Lease and this Construction Agreement, the terms and provisions of this Construction Agreement shall govern and control. In consideration of the mutual covenants and promises contained herein and in said Lease, the parties agree as follows:
1. Definitions. Each term used in this Construction Agreement shall have the meaning hereinafter set forth:
1.01 "Final Plans" shall mean the final plans and specifications for the construction of improvements mutually agreed upon by Landlord and Tenant, in accordance with the provisions of Section 2.01.
1.02 "Leasehold Improvements" shall mean the leasehold improvements to be constructed on the Premises in accordance with the Final Plans for use as a retail store and office/showroom/warehouse center, together with all appurtenances thereto. The construction of the Leasehold Improvements shall be Landlord's obligation, in addition to Landlord's obligation to construct, at Landlord's sole cost and expense, the Building Shell Improvements and Common Area Improvements.
1.03 "Project Architect" shall mean the architect responsible for drafting the Final Plans, who shall also coordinate and supervise with the Project Contractor the construction of the Building Shell and Leasehold Improvements. In addition, at the request of Tenant such Project Architect shall utilize the services of an employee of Tenant, as consulting architect ("Consulting Architect") for the construction of the Leasehold Improvements. The cost of such Consulting Architect shall be borne by Tenant. The Project Architect shall be selected by Landlord.
1.04 "Project Contractor" shall mean the contractor responsible for construction of the Building Shell Improvements and Leasehold Improvements in accordance with the Final Plans.
1.05 "Building Shell Improvements" shall mean the building shell to be constructed in accordance with Landlord's Final Plans, including, but not limited to, the foundation system, exterior and demising walls, roof system, raised facade at the entrance to the Premises, columns and related structural components, truck dock and trash compacting area, bollards located in the Common Area for the Premises as shown on the Final Plans, heating, venting and air conditioning system with all main ducts to the Premises, sprinkler system and all utilities brought to a point inside the rear wall of the Premises and the items set forth on Schedule 1 attached to this Construction Agreement.
1.06 "Common Area Improvements" shall mean all improvements to be constructed in the Common Areas including without limitation means of ingress and egress from public streets, curbs and curb cuts, parking areas, paving and striping, drives, traffic aisles, access ways, entrances, sidewalks, parking area lighting, loading areas, ramps, utility lines and facilities, common area sprinklers, landscaping, directional signs, pylon and monument signs and similar improvements to the Common Areas and all off-site improvements in connection with vehicular access from public streets to Common Areas and the Premises.
2. Construction of Improvements. Landlord shall cause the Leasehold Improvements to be constructed in accordance with the Final Plans. Landlord shall be responsible for contracting with the Project Architect and Project Contractor and for administering and supervising construction of the Leasehold Improvements. Tenant shall cooperate at all stages to promote the efficient and expeditious completion of the Leasehold Improvements. The Leasehold Improvements, the Building Shell Improvements and the Common Area Improvements are sometimes referred to collectively herein as the "Improvements". The Leasehold Improvements shall be constructed in accordance with the time schedule set forth herein, subject to Excusable Delays, as hereinafter defined. Landlord shall construct the Improvements in a good and workmanlike manner and shall cause all construction work to comply, with all applicable laws, orders, and regulations of governmental authorities and the terms and provisions of any restrictive covenants or deed restrictions.
2.01 Plans and Specifications Approval. Subsequent to the execution of the Lease, Landlord shall furnish to Tenant (I) copies of preliminary plans and specifications for the Building Shell Improvements and elevations of the storefront and (ii) a detailed site plan (the "Site Plan") of the Shopping Center showing the location, configuration and size of the Premises and other buildings, the layout of the parking areas, including number of parking spaces, drives and parking aisles, traffic lanes and direction of traffic, the location of entrances, curbs and curb cuts, pylon or monument signs and Common Areas in the Shopping Center. Tenant shall have furnished to Landlord Tenant's prototypical plans and specifications and floor plans for the Leasehold Improvements (the "Prototypical Plans"). Landlord shall submit to the Project Architect and the Project Architect shall prepare and submit to both Landlord and Tenant, proposed plans and specifications for the Building Shell Improvements and the Leasehold Improvements within _____ (__) days of Landlord's receipt of the Prototypical Plans. Landlord and Tenant shall thereafter have ten (10) days within which to approve or disapprove the proposed plans and specifications in writing. Any disapproval shall be accompanied by a detailed list specifying the points of disapproval and the changes which would satisfy such points. Such approval or disapproval shall be in writing directed to the Project Architect with a copy to the other party. The Project Architect (and Consulting Architect) shall have ten (10) days from the date of written disapproval to discuss such points of disapproval with both parties, make adjustments to the proposed plans and specifications, and resubmit revised proposed plans and specifications to both parties. Thereafter, Landlord and Tenant shall again have ten (10) days to approve or disapprove the proposed plans and specifications. This procedure shall be repeated until Landlord and Tenant have mutually agreed on the proposed plans and specifications. Each party shall acknowledge its approval by signing and delivering to the other party a set of such approved plans and specifications or a letter identifying the approved plans and specifications. The approved plans and specifications for the Building Shell Improvements and the Leasehold Improvements shall constitute the "Final Plans" for all purposes under this Lease. In the event Landlord and Tenant are unable to agree on Final Plans within _____ (__) days of the Date of the Lease, then either party, at its option, may terminate this Lease by written notice to the other given prior to securing fully approved Final Plans. Should this Lease terminate as a result of such failure, Landlord shall pay the cost of the Project Architect and Tenant shall pay the cost of the Consulting Architect, if any. In any instance where Landlord's or Tenant's approval is required hereunder, if Landlord or Tenant fails to deliver written disapproval and specifics of such disapproval as required and within the time period provided, then such party shall be deemed to have given the required approval. If the proposed plans and specifications for the Leasehold Improvements are substantially similar to the Prototypical Plans, such plans shall be deemed approved as the Final Plans.
2.02 Construction Contract. Upon selection of the Project Contractor, Landlord shall enter into a written construction contract with such contractor (as is typical and usual for projects similar to the Building Shell and Leasehold Improvements) governing such items as costs, schedule delays and retainage. The construction contract shall call for the construction of the Leasehold Improvements for a fixed price based on the Final Plans. Such fixed price shall be subject to adjustment based on any changes to the Final Plans. The construction contract shall also require the Project Contractor to furnish evidence of insurance insuring Landlord and Tenant from any and all claims as a result of injury or damage in connection with the Project Contractor's construction of the Leasehold Improvements.
2.03 Construction Schedule. Within five (5) business days of approval of the Final Plans, either the Landlord or Project Contractor, as appropriate, shall apply for a building permit and such other permits necessary for construction of the Improvements, and the Project Contractor shall commence construction of the Improvements immediately upon receipt of the permits and proceed with all due diligence until completion. If delivery of the Premises to Tenant Ready for Occupancy (as defined below) is delayed beyond the Delivery Date (as defined below) Tenant shall receive from Landlord two (2) days free rent for every day of delay beyond the Delivery Date that is not the result of an Excusable Delay or a change order requested by Tenant. Landlord shall deliver the Premises to Tenant Ready for Occupancy on or before _______, 200_ ("Delivery Date"). Landlord shall notify Tenant ninety (90) days prior to the date of delivery of the Premises Ready for Occupancy. Such notification is important to Tenant to enable Tenant to order trade fixtures and inventory and to begin hiring personnel.
Should the Premises not be Ready for Occupancy on or before ______, 200_ for any reason, without exception or extension for Excusable Delays, then Tenant, in its sole discretion, may terminate this Lease upon written notice to Landlord delivered at any time thereafter and prior to completion and, in such event, this Lease shall become null and void and Tenant shall have no further liability or obligations hereunder. Time is of the essence with respect to the time periods set forth in this Construction Agreement.
Upon the occurrence of all of the following, the Premises shall be deemed "Ready for Occupancy": (i) completion of construction of the Leasehold Improvements, in accordance with the Final Plans and all Regulations including without limitation, Tenant's exterior signage, (ii) substantial completion of construction of all Building Shell Improvements and Common Area Improvements, including without limitation, the items set forth on Schedule 1 attached hereto, with all equipment, utilities and systems in good condition and working order and with the Primary Parking Area and access to the Premises free and clear of any construction materials or equipment, obstructions or debris, (iii) receipt of a certificate of occupancy or equivalent for the Premises which permits Tenant to open for business when Tenant has completed fixtures and other interior work, (iv) actual physical possession of the Premises has been delivered to Tenant in a broom clean condition, free and clear of all personal property of any other parties and all tenancies and rights of any parties to possession, (v) actual physical possession of the Premises has been delivered to Tenant free and clear of any asbestos or other hazardous materials and any mechanic's lien claims which have not been bonded or otherwise satisfied so as to permit delivery of the Premises free and clear of any lien claim, (vi) delivery to Tenant of a copy of the certificate of occupancy issued by the applicable governmental authority for the Building Shell Improvements and a copy of the certificate of completion for the Building Shell Improvements and Leasehold Improvements signed by the Landlord's architect and (vii) ninety (90) days written notice from Landlord has been given to Tenant of the estimated delivery date prior to actual delivery of the Premises. The term "substantial completion" shall mean a duly executed certificate from the Project Architect certifying that the construction of the Leasehold Improvements has been completed in accordance with the Final Plans, subject to minor punch list items, which punch list shall be established as provided below. Tenant, however, reserves the right to make an additional punch list within thirty (30) days after occupancy which shall be submitted to Landlord and Landlord agrees to make repairs required by such punch list as soon as possible, at no additional cost to Tenant. Notwithstanding the foregoing, if after Tenant completes its work in the Premises and is ready to open for business Landlord fails to obtain and deliver to Tenant a copy of a permanent certificate of occupancy for the Premises which permits Tenant to open and operate the business without Tenant's right to remain open being conditioned upon completion by Landlord of any items required by governmental authority in connection with Landlord's construction of the Improvements, then rent shall be abated until a certificate of occupancy without such condition is delivered or Tenant shall be entitled to exercise any other remedies provided under the Lease.
2.04 Additional Close-Out Documentation. Notwithstanding anything to the contrary contained in this Construction Agreement, in addition to any other requirements set forth herein, Landlord shall deliver to Tenant all of the following as soon as possible following substantial completion of the Leasehold Improvements and Building Shell Improvements, but not later than thirty (30) days thereafter:
(a) Operation and maintenance manuals for the HVAC and all other equipment installed by Landlord in the Premises or that serves the Premises.
(b) The originals or copies of all guarantees and warranties obtained by Landlord in connection with the construction of the Building Shell Improvements and the Leasehold Improvements.
(c) A set of as-built plans and specifications for the Premises.
(d) Copies of Air Balance Reports for the HVAC serving the Premises.
(e) A list of the name, address and telephone number of all contractors and subcontractors that have supplied labor or furnished a major component of materials or equipment to the Premises on behalf of Landlord.
2.05 Excusable Delay. The term "excusable delay" shall mean events beyond the Project Contractor's or Landlord's control including acts of God, war, civil commotion, strikes, fire, flood, earthquake or other casualty, governmental regulation or restriction and abnormally adverse weather conditions. Financial inability or lack of funds shall not be an event beyond any party's control and shall not constitute an Excusable Delay. In the event of an Excusable Delay, Landlord shall not be penalized under Section 2.03 above.
2.06 Changes. If Tenant requests a change, alteration or addition, other than Correction Work, as defined below, after the Final Plans have been approved, it shall submit the same in writing to Landlord and to the Project Architect. Landlord shall provide Tenant with an estimate of the cost of such change and the additional time required and, upon receipt of same, Tenant shall have three (3) days to elect whether to proceed with such change and any extension of construction time that may be required. If Tenant elects to proceed, Landlord shall incorporate the change into the Final Plans and the construction contract. The cost of such change shall be paid by Tenant in accordance with Section 3, below. If Tenant elects not to make such change, then it shall immediately notify Landlord and construction shall proceed in accordance the Final Plans as previously approved. The delay in construction time caused by such changes shall extend the Delivery Date by the additional time established in accordance with the second sentence of this section, without penalty to either Landlord or the Project Contractor.
2.07 Governmental Regulations. The design and construction of the Improvements shall conform to any and all requirements of applicable building, plumbing, electrical and fire codes and to the requirements of any applicable governmental authority, as such codes and requirements may from time to time be amended or supplemented.
2.08 Entry by Tenant. During the course of construction of the Building Shell Improvements and Leasehold Improvements, Tenant or its designated agent shall have the right to enter the Premises to inspect Landlord's construction work, provided that such party shall not interfere with such work. If any such work is discovered to be defective or not in compliance with the Final Plans or applicable Regulations, Tenant shall notify Landlord and Landlord shall cause such work to be promptly corrected (the "Correction Work") without cost or expense to Tenant. The delay in construction time caused by such corrections shall not extend the Delivery Date.
During construction of the Leasehold Improvements, Tenant may enter the Premises for the purposes of installing trade fixtures, erecting signs, stocking merchandise and such other work as may be necessary or desirable to prepare to open for business from the Premises, provided that Tenant shall not unreasonably interfere with Landlord's construction work on the Premises.
2.09 Tenant's Inspection.
(a) Landlord shall reconfirm by written notice to Tenant the date of actual delivery of the Premises to Tenant Ready for Occupancy at least seven days prior to such date. The Project Architect and Tenant's Consulting Architect or representative shall meet at the Premises at a mutually acceptable date and time to conduct an on-site inspection of the Improvements and to prepare a punch list of all correction work.
(b) The Project Architect shall prepare a detailed written punch list of all corrections and repairs to be made to the Leasehold Improvements based on such inspection and a copy of such punch list shall be delivered to Landlord and Tenant. If any items which are not "minor" punch list items require correction, repair or replacement, including without limitation Correction Work, as defined above, then the Leasehold Improvements shall not be deemed substantially complete. After all such work which does not constitute "minor" punch list items has been completed, then the parties shall meet again to inspect the Leasehold Improvements and prepare a final punch list.
(c) If the Leasehold Improvements are completed in accordance with this Construction Agreement, except for minor punch list items, then (i) Landlord and Tenant shall sign the punch list prepared by the Project Architect and Landlord shall cause all such minor punch list items to be completed within 30 days thereafter and (ii) the Project Architect shall sign the certificate of substantial completion referenced in Section 2.03 above and deliver a signed copy to all parties within 7 days after such inspection.
(d) If for any reason whatsoever other than Tenant's negligent acts or omissions, the Premises is not Ready for Occupancy when required and as defined in Section 2.03 above, including without limitation, completion by Landlord of improvements to the Primary Parking Area free and clear of construction materials and other debris, completion of all sign structures to permit Tenant to install its signage and completion of access from public streets to the Premises, Tenant shall nevertheless have the right to open the Premises to the public for business, if deemed necessary by Tenant in its sole business judgment, in order to meet its schedule for opening stores, to offset costs of payroll, furniture, fixtures, merchandise and equipment and other costs, expenses and overhead. Although Tenant opens for business pursuant to this Section 2.08(d), payment of rent shall not commence, the Commencement Date shall not be deemed to have occurred and Tenant shall not be deemed to have accepted the Premises as Ready for Occupancy by taking possession and opening for business, unless and until the Premises is Ready for Occupancy as set forth in Section 2.03 above. Landlord acknowledges and agrees that Tenant's rights granted by Landlord under this Section 2.08(d) are a material inducement for Tenant to enter into this Lease.
2.10 Contractor Warranty. Landlord agrees to warrant the building and leasehold improvements against defects in materials and workmanship for a period of one (1) year (commencing on the date of substantial completion certified by the Project Architect).
3. Tenant's Share of Costs. Landlord shall be liable and pay for all construction costs of the Leasehold Improvements, except as otherwise noted herein. Tenant shall pay the portion of construction costs due to a change requested by Tenant under Section 2.05. Landlord shall forward to Tenant invoices from the Project Contractor detailing the actual cost of the change (less any applicable credit) and showing that same has been paid by Landlord (less statutory retainage withheld by Landlord). Upon receipt of such invoice, Tenant shall reimburse Landlord the cost of the change within twenty (20) days. Landlord shall withhold the applicable retainage amount out of such sum paid to the Project Contractor until completion of the work involving such change and expiration of the applicable period for filing mechanic's liens with respect to such work.
Appendix B: Work Letter (Simplified Form)
Tenant Improvements Rider to Lease or Work Letter
Terms and Definitions
General Description of Work: [describe work]
[Architect/Engineer] Preparing Plans: [name]
[Architect/Engineer]'s Address: [address]
Contractor: [name]
Contractor's Address: [address]
Contractor's Insurance
Death/bodily injury:
Property/Builder's risk:
Agreements
A. Preparation of Plans. Within [number] days from the execution of this lease, [Landlord/Tenant] will retain the [architect/engineer] to prepare the Plans, specifications, and other material required for completing performance of the Work (the "Plans"). The Plans will be delivered immediately to [Tenant/Landlord], who has [number] days to approve the Plans or to indicate any objections to the Plans. If [Tenant/Landlord] has objections to the Plans, it will communicate them to [Landlord/Tenant] within that time. This process will be repeated until the Plans are approved by both Landlord and Tenant. The cost of preparation of the Plans will be borne as follows: [describe cost arrangement, e.g., Landlord will pay for the initial $[amount] of the cost and Tenant will pay all excess costs].
B. Performance of Work. [Landlord/Tenant] will be responsible for retaining Contractor to perform the Work. [Landlord/Tenant/Contractor] will obtain all required permits for the Work. After approval of the Plans, Contractor will be instructed to perform the Work in accordance with the approved Plans and all applicable laws. The cost of performance of the Work will be borne as follows: [describe cost arrangement, e.g., Landlord will pay for the initial $[amount] of the cost and Tenant will pay all excess costs].
C. Schedules
1. The parties estimate that the Plans will be approved no later than [date]. If the Plans are not approved by that date, the Commencement Date will be extended by the number of days of delay. If the Plans are not approved by [date], either party may terminate this lease by notifying the other before approval of the Plans.
2. The parties estimate that it will take [number] days to complete the Work. If the Work takes longer to perform and the delay is Tenant's fault, the Commencement Date will be as stated in the lease and Tenant must begin paying Rent on the Commencement Date notwithstanding that the Work is not finished. If the delay is Landlord's fault, the Commencement Date will be extended by the number of days of delay. As provided in paragraph B, [Landlord/Tenant] is responsible for retaining Contractor; accordingly, any delay in performance of the Work that is Contractor's fault will be attributable to [Landlord/Tenant].
D. Changes in the Work. Any changes in the Plans or the Work after initial approval of the Plans will require approval of Landlord and Tenant. As part of such approval, the parties must agree on any required changes to the construction schedule and who will bear any increase in cost.
E. Contractor's Insurance. Contractor must maintain insurance reasonably satisfactory to Landlord in the amounts specified in the terms and definitions.
___________________________________
[Name of landlord]
___________________________________
[Name of tenant]
Appendix C: Specification List Exhibit to Work Letter
Building Description and Specifications
Letter of Intent to Lease
BUILDING SIZE AND LOCATION
A 265,400 square foot rear-loaded, concrete tilt-up building with a clear height of 34' and 40' x 45' column spacing (with the exception of the first and last bay which will be 60' in depth) and 24 dock doors located in Dallas, Texas. The building will be equipped with an insulated TPO roof system and with an ESFR fire protection system. It will also include a one-story 7,500 square feet of main office area, a 1,500 square foot shipping office, a 256,400 square foot distribution area and a covered patio area (need to specify size and materials) adjacent to the breakroom. Landlord warrants the site is properly zoned and subdivided, with paved road and utilities (water, gas, electric) at the curbline. This will be a single-user site with expansion area dedicated to the future use of the sole tenant.
The warehouse area is to be in substantial conformance to the Sedlak drawing dated 5-16-03 only as it relates to conveyor loads, not building dimension.
GENERAL CONDITIONS
• Supervision by a Project Manager and an on site Superintendent
• Regular safety inspections and monitoring by our Safety Manager
• Building layout
• Weekly photographic job progress documentation
• Temporary sanitary facilities
• Temporary utility usage fees for construction activities
• Job trailer with a meeting room for progress meetings
• Storage trailer
• All necessary construction debris removal
• Cleaning - the building will be turned over to the Owner in a broom swept condition
• Building Permit and all Municipal Fees
• Builder's Risk Insurance
• Design, including ADA approval & fees
• Geotechnical Testing as required for proper design
• Materials Testing to meet City and Architect's Standards and including Concrete testing, floor flatness testing, Soils testing; and steel testing
• Sewer, natural gas, domestic water and fire protection connections will be provided to building
• Stone under the concrete building slab, dock aprons, and ramp per structural design up to 12" thick
• 18"x 36" sonotube formed, concrete supports for each set of metal stairs
• Ramp retaining walls
• Painted, steel railings along the sides of the ramp
SITE GRADING AND EXCAVATION
• Clear site of surface vegetation and soil of organic materials.
• Fine grade building pad to plus or minus one tenth of a foot.
• 1" maximum movement (PVR) based on geotechnical engineer's recommendation
• Compaction to be a minimum of 95% modified proctor in all locations, inclusive of building and paved areas.
• Rough grading of the site to plus or minus two tenths of a foot.
• Soil compaction testing will be performed on a continual basis to meet or exceed soils engineer's requirements.
SOIL TREATMENT
• Our proposal includes but is not limited to 12" of crushed rock and 4 passes of water injection of the building pad in order to meet the geotechnical's recommendations for the slab and foundation design.
LANDSCAPE AND IRRIGATION
• Landscape area to be determined on final Landscape Plan to meet City Code and Deed Restrictions. Landlord shall submit its landscaping plan to Tenant for Tenant's review and approval prior to installation.
• Planting will provide a mix of deciduous and shade trees and shrubs in landscaped area.
• Bark mulch at all shrub areas, planting stakes, herbicide pre-emergent (fertilizer & amenities for planting pits), etc. to be included.
• All concrete curbs at landscape planting areas will include PVC weeps for drainage of static water.
UTILITIES
Landlord, at its sole cost and expense, warrants the following utilities are sufficient for Tenant's intended use:
• Domestic Water: Dallas Water and Sewer Company will serve the site with a 2" or greater if required, domestic water connected to existing water supply system. (One (1) meter each to be set for water and irrigation.).Fire Water: Dallas Water and Sewer Company will provide ample pressure and quantity for an ESFR fire protection system through a fire protection water line to the building. Recent flow tests indicate 2,500 gpm with 80 psi residual pressure. March 2003, American Leather
• Sewer: Dallas Water and Sewer Company will provide a 6" or greater if required, sanitary sewer service connected to existing sanitary sewer service with capacity available to serve the project.
• Storm Drain: Storm sewer system to remove all storm water from facility's roof and paved areas. Storm water is conveyed to common, off-site storm water detention ponds maintained by Landlord. Tenant shall approve any drainage plans. Landlord advises that no detention on the truck courts is required.
• Gas: Oncor will provide the service line at medium pressure to meter base as required to meet Tenant's needs.
• Electric: Oncor will provide service to the building to meet Tenant's needs.
CONCRETE PAVING (Subject to revision upon receipt of final Geotechnical Report)
• Approximately 130,763 sf of truckpaving
• Truck paving to be 8" at 3,000 psi concrete at 28-day break, over compacted onsite material, reinforced with #3's at 18" on center.
• Approximately 60,237 sf of auto paving included to accommodate 225 cars.
• Auto paving to be 6" at 3,000 psi concrete at 28-day break, over compacted onsite material, reinforced with #3's at 18" on center.
• All truck and auto paving areas to be striped including handicap, fire lane and visitor parking per state and local requirements.
• Approximately 6,200 If of 6" monolithic (vertical concrete) curb included for the paving areas.
• Light broom finished sidewalks and entry walkways, approximately 4,500 square feet.
• Control and Expansion joints as recommended by the engineer, caulked per Specifications. Expansion joints at 90' on center; control joints @15' on center.
BUILDING FOUNDATIONS
• 240 piers - 24" diameter belled piers to a depth of 15' or more as required by the Structural Engineer (Predicated by final geotechnical report.)
• Concrete Strength to be 3,000 psi at 28-day break.
FLOOR SLAB
• Concrete floor slabs to be 6" thick
• 4,000 psi at 28-day break in all warehouse areas, reinforced with #3's at 18" on center, steel trowel finish.
• Construction joints to receive ½" diameter smooth dowels at 24" O.C.
Control joints to be provided every 15-18' or as recommend by structural engineer and caulked.
• Slip dowels to be greased on one end to allow expansion.
• Steel trowel finish and laser screened to a minimum FF of 50 / FL of 50.
• The slab will be treated with Ashford Formula concrete sealer at a rate of 200 square feet per gallon or per manufacturer recommendation,
• 6 mil poly vapor barrier will be installed under areas that receive finish flooring materials and under areas that receive epoxy floor coatings.
TILT-UP WALLS
• Nominal panel thickness of 8 ½ ", approximately 105,600 sf.
• Concrete strength to 4,000 psi at 28-day break.
• Exterior face of panels shall receive a floor slab finish and shall be prepared to receive finish paint.
• Interior face of panels to receive a hard trowel finish.
• Interior pick points and brace points will be covered with patch caps.
• Exterior panel joints will be caulked for full height.
• Panels adjacent to overhead doors must be solid concrete at least two (2) feet in each direction from door.
• Enlarged knockouts along the expansion wall to allow for future expansion.
• Screening walls as per the Site Plan as required by the Deed Restriction.
PUMP ROOM
• To consist of 8" x 8" CMU block approximately 12' x 14' x 9', with ladder access to the roof.
• Roof to consist of lightweight concrete over "B" decking.
STRUCTURAL STEEL AND METALS
• Column spacing to be 40' x 45' (with the exception of the first and last bay which will be 60' in depth) with 34' clear height below the lowest structural member of the roof deck. Fabricated structural steel columns, beams, joist and deck designed per Factory Mutual. The building columns are expected to be 10" sq. columns.
• Structural steel for beams, joist and deck will need to support ceiling hung conveyor as illustrated by Sedlak drawings.
• Roof deck to be 22 gauge painted white B deck.
• Open web joist /joist girder system (gray primer.)
Included in this price, all interior columns will be painted silver to the bottom of the joist/joist girder.
• Galvanized steel stairs at warehouse exits as required per Code.
• Galvanized steel edge angle at all dock leveler pits.
• One (1) steel roof ladder with safety cage.
• 6" concrete filled steel (sell 80) pipe bollards - four (4) at the drive through door.
• All dock doors to be protected by 48" door track guards (1/2" bent Z plate to 48" AFF) pre-finished safety yellow - one at each dock door.
• Guard rails (Rite-Hite or equal) to protect all office areas.
• Rear truck court to be secured by an automatic sliding security gate and fencing surrounding the entire rear truck court area, estimated to be 8451f of 8' tall chain linked.
THERMAL & MOISTURE PROTECTION ROOF STRUCTURE
• Roof system to be a single ply, mechanically fastened TPO roof system with R-ll insulation and a 10-year warranty (NDL). Install in accordance with manufacturer's written instructions.
• Caulking for walk doors, aluminum doors and windows, concrete control joints and concrete wall panels. Control Joint caulking will be done with a 2-part epoxy caulk (MM-80 or equal)
• Twenty-six (26) skylights: Naturalite Corp., Model ADD-5296, nominal 4' x 8' foot, or equal. Frame shall be clear anodized aluminum and plastic shall be white acrylic. Laine-Aire, Model SVDD-55102. Nominal 4' x 8'.
OPENINGS EXTERIOR DOORS
Twenty (20) 3' W x7' H exterior walk doors to be:
• Hollow metal doors and frames
• Schlage series 'AL', brushed aluminum hardware (or equivalent)
• Dorma series 8000 panic hardware (or equivalent)
• Thresholds, weather-striping and automatic closers for the building entrances
ROLL-UP DOORS
Twenty-four (24) rear-loaded dock high doors to be:
• 9' x l0'
• 24 gauge
• Installed on vertical track
• Manual, chain driven option
• White-prefinished, sectional with insulation
• Protected by 48" door track guards (1/2" bent Z plate to 48" AFF) pre-finished safety yellow - one at each dock door
• All overhead doors shall have 100,000 cycle operators
One (1) Grade Level door(s) to be:
• 12' x l4'
• 24 gauge
• Installed on vertical track
• Automatic hoist driven
• White pre-finished; sectional insulated drive-in doors with view windows.
• All overhead doors shall have 100,000 cycle operators
GLASS & GLAZING
• Approximately 2,000 square feet of glass storefront to a height of 12 feet.
• Double pane insulated
• Anodized aluminum
• Non-reflective bronze or clear
• One single entry door has been included for office entrance.
• One single entry door to outdoor patio area.
FINISHES EXTERIOR WALL PAINTING
Building exterior will be prepared to receive:
• One coat primer
• Texture coat of exterior walls
• Three color paint scheme approved by Tenant
• Exterior doors to receive enamel paint
• Exterior steel handrails and all miscellaneous metal to receive enamel paint
INTERIOR WALL PAINTING
• All building hollow metal doors & frames, overhead door frames, imbedded dock steel, bollards, and metal stairs will be painted. The roof deck is to be factory painted white. The joists do not need to be painted white but primed factory grey. The columns need to be painted gray and the interior side of die exterior walls painted white.
• Approximately 2,500 SF of epoxy floor coating at battery charging area
• Pipe bollards will be painted "Safety" Yellow.
DOCK EQUIPMENT
• Twenty-two (22) locations of Serco dock equipment as described in the original request for proposal have been included: Serco WL830 mechanical levelers (minimum of 30,000 pound capacity), dock seals (Serco S-700-A), Serco Dok-Loks with lights and rotating hook, dock fans, interior dock spotlights (Serco DKL-40VA) and combo control boxes.
• All doors to be protected by 48" door track guards (1/2" bent Z plate to 48" AFF) pre-finished safety yellow - one at each dock door. Note: These will be installed in addition to pipe bollards at drive-in door.
MECHANICAL FIRE PROTECTION
• Warehouse areas will be protected with an ESFR wet system designed to NFPA 13 and local fire codes and include an electric fire pump (or diesel operated pump) and pump house for the ESFR system. Head layout for an ESFR system. System (pump and main lines) shall be sized to accommodate the future expansion and third level of mezzanine.
• Wet sprinkler system will be required for the two-level picking area (capable of being expanded to third-level in the future) estimated to be approximately 32,200 SF.
• Office area to have sprinkler per code with semi-recessed heads. Additional heads shall be priced as part of the Tenant Improvement design.
• Tamper and flow switches provided on all valves and pump controller.
HVAC
• Three (3) direct gas fired roof mounted Cambridge Heater to provide 60 degrees inside when it is 17 degrees outside with a filter section and ten sets of throw away filters to provide dust control.
• Fourteen (14) 8' x 8s adjustable louvers with bird screen and baked enamel finish to provide building ventilation, inclusive of 2" filter racks and 1 set of 24" x 24" -30% pleated media to reduce dust in the apparel area.
• Fourteen (14) Roof mounted exhaust fans.
• Three (3) Air changes per hour assuming 60% racked with closed doors and wired to one timer
• Exhaust system with hood if required near the lift truck battery charging area.
PLUMBING
• Under slab sanitary sewer and above slab water distribution within shell, sized and located to serve the expansion area.
• Insulation of water lines
• Battery storage plumbing and interceptors
• Rain water will be removed from the roof via interior drains with discharge onto the truck court.
• Seven (7) hi/lo water fountains, at middle of warehouse, main break room, office restroom, warehouse locker/restroom area, trucker lounge, pick-pack area, and remote restroom.
• Two (2) eye wash stations in the battery charging area and one (1) in the janitor's room.
ELECTRICAL AND LIGHTING ELECTRICAL SERVICE
• One 2,500 amp switchboard/distribution panel. Developer to confirm that this is sized to meet the needs of the future expansion.
• Primary electrical conduit from existing utility service to transformer pad.
• Secondary electrical service, 277-480 volt, 3-phase and conduit to service main panel.
• Two each 4" Primary phone conduits from the location of telecommunication facilities to service panel location.
• Lift truck battery charging station including twenty-two (22) disconnects at 480V/277V with emergency eye wash units.
• Twenty (20) dedicated-isolated ground power outlets at 208V/120V outlets on multiple levels of the pick-pack area.
• Also required will be service outlets (6 each) on the ceiling for RF and PA systems, service outlets at every dock door and thirty (30) miscellaneous locations around the facility.
• Five (5) dedicated-isolated ground power outlets near the maintenance area at approximately three (3) receptacles with 480V/30 amps, two (2) with 120V/15 amp and one (1) with 240V/30 amps.
• Compactors will require two (2) outlets at 480V/277V.
• The conveyor is estimated to require 480V/277V at 750 amps with three 200A breakers, three 50A breakers, and five 20A breakers, conduit and wire from the panel are to be provided by Tenant.
• Landlord shall install an FM Global approved fire alarm system covering: Remote Power Supplies, PS-1270 Batteries, Photo-Electric Smoke Detectors, Addressable Manual Pull Stations on every exit door, Monitor Modules at Duct Detectors, Control Modules, Relay Module, Strobes, Horn Strobes, Dual Sync Modules and Panic Bars on all exit doors.
• Centralized lighting switch for each office and warehouse areas to be located by the main entrance door to each area.
• Night light system will consist of using the office emergency lights and in the warehouse, wiring certain lamps to stay on. All emergency lighting shall be per Code.
• Landlord to provide and install a security system, inclusive of conduit, electric back boxes and string for all card readers (42" AFF), 24VDC, 1 AMP at each door location for Tenant installed electric strikes (for which installation will be coordinated with between landlord and tenant's vendor). Cameras will require 120 V non-dedicated outlets A Security system allowance of $100,000 including conduit, wire, and door hardware is included.
INTERIOR LIGHTING
• Exit and emergency lights installed over exterior man-doors averaging 1 foot candle at 48" AFF
• A full blown site photometric study will be done to calculate the best possible placement for warehouse lighting and to confirm/predict above indicated light levels.
• 400-watt metal halide high bay fixtures providing 30 foot candles maintained at 30" above floor level in the warehouse area with the fixture pattern to be in accordance with Tenant's space plan (lights to be positioned in aisles). Landlord estimates three hundred and thirty two (332) Lumark 400W Hi-bay open fixture #MHSS-SA15-400-277 or equal based on specs from RFP dated 5-13-03 and Sedlak Drawing.
• Fluorescent task lighting in the aisles and pick up areas of the multi-level, pick-pack area with a required light level equal to 60-foot-candles based on specs form the RFP dated 5-13-03 and Sedlak Drawing. The Mezzanine layout shall be assumed to be the same as the first floor layout. The fixtures for the first floor shall be mounted to the bottom of the mezzanine and the second floor fixtures shall be hung by chains at approximately 12' above the mezzanine.
• Emergency lighting as required by code.
SITE LIGHTING
• Forty (40) 400-watt metal halide wall packs. (Lumark PM40 or equal.)
• All exterior lights will be controlled via photocells and timers.
• Exterior average illumination levels shall be one foot-candle within 50 feet of the building and parking lot shall receive code minimum levels of illumination.
TENANT IMPORVEMENT ALLOWANCE
Office TI Allowance (7,500 sf @ $30.00/sf) $240,000.00
Shipping Office TI Allowance (1500sf@$33.00/sf) $49,500.00
Security Allowance $100,000.00
Caged Maintenance Area (500sf) $10,000.00
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