RE: Philadelphia Suburban Office Market - Third Quarter 2011
Amid news of wavering financial markets and lackluster hiring, the Philadelphia region was stagnant in the 3Q of 2011. Landlords with stabilized assets continue to fiercely compete to retain their existing tenants and attract new companies to their buildings. Oftentimes the tenants in the marketplace looking to move are driven by unstable ownership characterized by unwillingness/inability to negotiate lease renewals, deferred maintenance (faulty heating and air conditioning, parking lots in disrepair, etc.), poor property management, and lack of capital to fund tenant improvements.
If you are a tenant in a building where the landlord has defaulted on its loan, the lender will attempt one of two things: 1) to renegotiate the loan terms to allow the current landlord to retain ownership; or 2) if renegotiating loan terms are not feasible, the lender will enter into foreclosure proceedings to take title of the property. If foreclosure proceedings begin, a court will appoint a receiver to act as the property manager and take over day-to-day operations. As the foreclosure process unfolds, it culminates with a public foreclosure auction commonly known as a sheriff’s sale. The new buyer, often the lender, will then assume control of the property and often retains the receiver to act as the property manager. This new buyer now has a vested interest to make sure that the building is operating efficiently and the results for tenants are often positive as educated real estate advisors and capital are available to renew leases, complete tenant improvements and correct poor property management.
When a property is in foreclosure, it is often a great time to renegotiate your lease as the lender’s interest lies in stabilizing tenancy and long term cash flow to ultimately deliver the highest sales price possible for your building.
Several things that tenants should have in place to protect themselves in case of foreclosure are:
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Subordination, Non-Disturbance and Attornment Agreement (SNDA)
Offset Rent/Self Help Rights
Termination Rights |
If you are unsure what protection you have in place and your building is in receivership, special servicing or has been noticed for sheriff’s sale, please contact us to discuss.
Our team would like to thank the following clients for their support in the third quarter of 2011:
Please contact us to receive a report published by Torto Wheaton Research as well as CBRE, Inc.'s MarketView for the Third Quarter of 2011. They will keep you updated as to how vacancy, rental rates, and employment trends are effecting the Philadelphia Region's office market.
The office market continues to be in the flux and depending on the submarket in question, offers either the tenant or the landlord leverage in negotiations. If you anticipate needing more space, have been contemplating a lease restructure, or simply want an overview of current market conditions, we should be talking now.
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We specialize in Tenant Advisory and are committed to delivering superior results for our clients.
Sincerely yours,
