What's Happening?

The dog days of summer may be here, but by all accounts we’re feline fine!

In late May Lacey Gourley spoke to us about hot topics in labor and employment law stressing the importance of having a handle on the problem employees who chat early, eat late, and wear troubling outfits – aka rule breakers and opportunists. Takeaways from the discussion included:

1. A reminder to review employee handbooks regularly with the caveat that more detail is not always best
2. Be very careful how you designate employees, contractors, and other types of staff – overtime pay is a federal requirement for full-time employees and the penalties for wrongly categorized staff are steep
3. Keep an eye on the sick leave ordinance – it has been challenged and will continue to be challenged in court; however, in the meantime you must prepare for the change in PTO requirements

In late June we welcomed Allison Bowers to speak to the membership about the #MeToo Movement and the implications of the movement as they relate to law. We learned about the M&M attorney who subjected his assistant to sustained physical harassment as well as everyday heroes like ‘snackman’ that deescalated an altercation with using physical space to do something completely innocuous – eat chips.

We were informed of a government report that said that 51% of female associates had reported sexual harassment at work and we explored some case studies of law firms that were deeply entangled in sexual harassment lawsuits. Our membership shared ways their firms were combating these issues such as the ‘No A**h-le’ policy and frequent, meaningful trainings that sacrifice billable hours and show female and male employees alike that sexual harassment is not acceptable.

 At the top of the list of takeaways was to avoid being a passive bystander. We committed to action and to utilize strategies to help our fellow co-workers in these situations by redirecting attention, removing them from the situation, or confronting the aggressor.

If you miss out on a lunch & learn, please head to the member area of the webpage (accessible via the homepage in the top right corner). When the new page loads, please find the newly created ‘Lunch & Learn Presentations’ tab on the sidebar. If our presenter provides us with a copy of the slides or a handout, we’ll post them under that tab in order for our members to more easily locate educational materials. For other documents, articles, and chapter documents, please look in the ‘Downloads’ tab on the same screen.

We have some exciting events on the horizon as well as initiatives that are being worked-up behind the scenes at the board level.

Some highlights include:

• Education Seminar & Expo heads to the ‘Old West’ on August 16^th @ The Intercontinental

• Regional Conference is in Austin October 18^th-20^th. #alaregionalaustin submissions are welcome and encouraged – more details in the conference recap below and the announcements on our homepage

• Austin Chapter is working with the Alamo Chapter to plan a Happy Hour during the Regional Conference

• All-Texas Meet-Up planning has begun for an event in February 2020 – think cruise, hill country wine retreat, etc.

• Community Relations is revamping our philanthropic and volunteer offerings and they need your input. Remember to fill out their survey so that we can participate in initiatives that YOU care about. https://www.surveymonkey.com/r/S9V7BZP

-Mike Virga, Communications Chair

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National Conference Recap

An ALA professional conference is a unique experience that every legal professional should have the opportunity to attend at least once in their career. The camaraderie between chapter members, the region, and the international chapter is something that can only truly be experienced in person as close to 1,000 members descend upon the conference center.  My first conference was the National conference that took place in Denver last year. Every moment of the extended weekend was filled with excellent education, inspiring speakers, laughter, and the sense of community. I finally fully understood what it meant to be a member of the ALA.

This year the conference took place at the Gaylord in National Harbor Maryland. Those same feelings I’d experienced last year came racing back in when the piccolo reached the climax of the National Anthem during the welcome breakfast. As I looked around the room I noticed that several members had been moved to tears over the song. It was a phenomenal way to kick off the conference and a heck of a way to set the stage for the keynote speech from John Quinones, host of the hit show What Would You Do?

John kept the energy flowing with his vivid stories about the sewer children of Bogota, Colombia, his childhood in Texas, his big break in radio, and his path to success in reporting through connecting with and telling the stories of the marginalized. It was a particularly timely discussion given the recent politics of immigration, and a huge reminder that with patience and perseverance we can all reach our full potential. He also stressed that simply doing the right thing when nobody is watching is just as important if not more important than doing the right thing in front of an audience of your peers. We must strive to live by these ideas in every aspect of our personal and professional lives.

A great part of the conference experience is the freedom to choose your own path and explore topics you’ve always wondered about, or those that you think you’ve mastered and come to find you’ve really only scratched the surface. ALA provides focused tracks in specialty areas and a certificate track for a certain discipline at each conference – this year a Finance Specialist Certificate Program was available to all attendees. 

The conference wrapped with a surprise speaker familiar to many Austin Chapter members – Judy Hissong with Nesso Strategies. When the scheduled speaker had a last minute family emergency, Judy agreed to step in at the last minute and she totally knocked it out of the park. She spoke to the value of being true to yourself and the value in the relationships we build in our professional lives. Her words rang true with the theme of the conference ‘Navigate Our Future Together’, and much like the anthem at the outset of the conference, her speech left few dry eyes in the audience.  

The conference theme is a microcosm for the work being done behind the scenes as part of a multi-year effort to redefine the identity of our organization. If you have not already done so, please follow this link to the national website and complete the Defining Our Identity Positioning Statement Survey. 

Over ten members from the Austin Chapter attended the 2018 National Conference. That is fantastic, BUT, we want to see many more faces at the Regional Conference in October. The chapter is giving away a free registration to a randomly selected member. All you need to do is grab a colleague, friend, or family member (or even just go-it alone), head out to an Austin landmark or favorite restaurant, snap a selfie, and post it to social media with the hashtag #alaregionalaustin. That’s it folks! Each unique photo with the proper hashtag will count as one entry into the drawing. If you don’t have social media, please send the photo to info@austinala.org.

Read on for blurbs from the dynamic duo from Giordani Swanger Ripp Jetel, LLP Amy Quinones and Alyssa Gault. Both were first-time conference attendees this year with Alyssa being a winner of a conference giveaway (we love when members utilize conference registration giveaways!!!).

Amy Quinones - Firm Administrator 

Giordani Swanger Ripp Jetel, LLP

"I had a fantastic experience at the National ALA conference in National Harbor, MD. The whole event was well-organized, full of insightful sessions, and fun! I was really impressed with the first time attendees breakfast which helped set the stage for what to expect throughout the conference and included a great ice-breaker activity to get know a few of the many new faces at the event. The caliber of the event was highlighted for me by the key-note speaker, the journalist, John Quinones (no relation that I know of!). His background story, path to success, and the work he has done for others was so inspiring to hear firsthand.  As someone who is still fairly new to the legal administration role, I found nuggets of information in every session I attended - from HR, to accounting, to cybersecurity, and even strategic planning, that I brought home with the hopes of incorporating into my firm. I definitely plan to participate in as many future conferences as possible!"

Alyssa Gault - Accounting Administrator 

Giordani Swanger Ripp Jetel, LLP

“My first ALA National Conference was a great experience. I really enjoyed the speakers they had each morning, very inspiring! The sessions were great too and there were so many to choose from. I was also able to spend some time with my Austin Chapter, which I hadn’t before, and this gave me the opportunity to finally do that and it was great getting to know them. I learned a lot and really feel connected to ALA now!”

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Business Partner Spotlight

9 PROBLEMS A TENANT REP BROKER CAN HELP YOU SOLVE, BESIDES FINDING & LEASING OFFICE SPACE

So you’ve done your research. You know what a tenant representation broker is and that they can help you locate your commercial real estate and negotiate rental rates.

But did you know they can help you solve far more than just that? At AQUILA, we want you to get the full value out of your relationship with your tenant representative.

In this article, we explain nine other commercial real estate solutions your tenant rep broker can help you with, including responding to external factors such as parking needs and ownership changes, reevaluating your real estate needs from resizing to expanding and renewing, as well as helpful clauses that can help protect you over the life of your lease.

1. Solving for Parking Solutions

Parking is a hot commodity in Austin, particularly in the CBD and surrounding areas. Whether you need to negotiate for additional parking during your lease negotiations, or you’re in an existing space but have found that the available parking no longer suits your needs, a tenant rep broker can help you think outside the box to find a solution that will work for you.

For example, if your company has atypical operating hours, often times a higher parking ratio can be negotiated for after hours parking at your location.

For companies with more traditional hours, options may include negotiating to lease additional parking spaces at an adjacent surface lot or parking garage, or even working out an agreement with a nearby church or restaurant to use their parking at alternate hours.

For more on how a tenant representation broker can help you solve your parking woes, read our article: 5 Creative Parking Solutions for Firms in Downtown Austin or download our Downtown Austin Parking Map.

2. Responding to a Change in Ownership

Should the property you occupy change hands, it’s your tenant rep’s responsibility to determine how this might impact you from a day-to-day perspective as well as long term.

For example, does the new owner have plans to renovate or make improvements to the building? If so, will there be disruptions to their space/parking? What impact will this have on taxes and operating expenses? Will property management change?

To learn more about how a change in property ownership can impact you, My Office Building Just Sold: What Does That Mean for Me?

3. Managing Expansion & Growth

Planning for Future Expansion

If you know that your company has plans to grow, it is important for your tenant rep broker to help you negotiate for an expansion clause in your lease. This can come in many forms:

• Right of First Offer (ROFO): a clause within the lease in which you get “first dibs” on a space within your building before the landlord can begin marketing the space to the public. Your option will outline what space(s) will fall within this clause as most landlords like to limit this to the adjacent space. Larger tenants should get rights on adjacent floors or the remainder of the building.  
• Right of First Refusal (ROFR): a clause within your lease that means if a third party is interested in another space in the building, once they negotiate terms with the landlord as evidenced by a signed letter of intent, those terms must first be offered to you for you to either accept the terms and the space or refuse before the other tenant can move forward.
• Must Take: In this situation, you agree to take the entire space you will eventually need on day one. However, the landlord allows you a “ramp up” period, in which you will not be required to pay rent on a portion of the space for a designated period of time.

AQUILA Pro Tip

A good tenant rep broker will negotiate language into your lease saying if you need more space within a year of signing a lease, then the terms/economics would be the same as previously negotiated. The thinking here is the rate could not have changed so dramatically in twelve months.

Meeting Unexpected Growth Needs

If you are partway through your lease term and finding that you’ve outgrown your current space but don’t have any expansion options (or have already utilized them), a tenant rep broker can help you find the right solution.

Depending on your landlord and the availability in your current building, a tenant rep broker can help you evaluate three potential solutions:

If there is available space in your current building, your tenant rep can help you negotiate an expansion within your current building.

If there is not enough space to accommodate your required growth within the building and you’re open to a remote office, your tenant rep can help you locate a satellite office.

Finally, if there’s not room for expansion in your current building and you need to keep all of your employees under one roof, your tenant rep can help you relocate to a new, larger space and sublease your existing suite.

To learn how the AQUILA Tenant Rep team helped Main Street Hub manage its exponential growth, read our case study: The Story of Main Street Hub’s Ever Multiplying Real Estate Needs

4. Subleasing Unused Space

The need to sublease your space can arise for a number of reasons. Perhaps you’ve outgrown your current space and are relocating to a larger location. Or maybe you’ve downsized within your suite and want to sublease the additional space.

Whatever the reason, subleasing your space can be a valuable decision that prevents you from paying thousands (or hundreds of thousands) of dollars on vacant or unused space.

Your tenant rep broker can help you analyze your lease to ensure that your sublease language allows you the most flexibility. You will want to make sure the landlord cannot unreasonably withhold, delay or consent to a sublease.

Landlords typically like to limit who you can sublease to and this is where a good negotiation comes in to play. The ability to market your space to any tenant is important. In addition, you will want to make sure you are able to keep a portion of any profits if the market has appreciated from when your lease commenced. It is standard for landlords to want to keep 50% of any profits made by tenants.

AQUILA Pro Tip

During the lease negotiation it is important to understand what sublease rights you have and ensuring the landlord cannot unreasonably withhold who you have the right to sublease to.

Recapture rights are common in subleases and you will want to make sure this right is applicable only if the sublease is for the entire term. Sometimes tenants want to sublease only a portion of their space which could allow the landlord to recapture the entire space.  

Additionally, your tenant rep broker can help you market your space to the brokerage community, and negotiate with the sublessee to ensure you get the most favorable terms.

5. Renewing Your Lease

When it comes time to renew your lease, it is important to engage a tenant rep broker, even if you have a renewal option already written into your existing lease.

Typically, if you have a renewal notice in your lease, it will occur 6 to 12 months prior to your lease expiration. However, it is important to begin the renewal process far before your renewal period.

Beginning early gives you time to evaluate all market options, even if you have every intention of staying put, in order to create leverage and negotiate the best terms with your landlord.

Additionally, in highly competitive markets such as Austin, it can often be in your favor to renew your lease early in order to lock in lower market rates and potentially receive desired concessions from the landlord. For more on the benefits of renewing early, read our article Renewing Your Commercial Lease: 3 Reasons to Renew Early (and 3 Reasons to Not).

Regardless of if you have a renewal option or not, your tenant rep broker should be able to help you negotiate favorable rates based on market comps. They may also be able to negotiate concessions such as a TI allowance, which is not common during renewals.

Read our case study to see how Capital Factory leveraged its early renewal to receive favorable terms and a large TI allowance.

AQUILA Pro Tip

A good tenant rep broker will negotiate renewal language into your original lease so the renewal rate is to be based on recent market comparables (not just renewals). This is very important in order to lock in the most favorable rates.

It is also important to have the right to “void” the option if you cannot come to terms with the landlord.  

6. Negotiating Protective Rights into Your Lease

On top of the standard renewal and expansion rights, there are a number of rights or clauses that your tenant rep broker can help you negotiate into your lease in order to help protect you over time.

Termination Rights

A termination option is something to consider when the landlord is pushing for a longer term, but you are only willing to commit to a shorter term. For example, if a landlord requires a 10-year lease on a space, but you only want a five-year term, you could ask for a termination option in your lease that would allow you to cancel at five years. Termination options are often subject to a penalty, so it is important for your tenant rep broker to limit these to only the “unused” portion of the leasing commissions and tenant improvement allowance. Additionally, while it is standard for a landlord to ask for the penalty to be due at the time of the notice, a good tenant rep can negotiate for the fee to be due at the actual date of termination instead. Termination options are great for tenants, but landlords hesitate providing these as they don’t offer certainty. In competitive markets like Austin, these rights are rarely granted.

Audit Rights

It’s important that your tenant rep ensure you have negotiated the right to audit your controllable operating expenses; you should have the right to audit every year, not just once over the life of the term. Additionally, they should provide flexibility on who they can hire to perform the audit. Finally, your broker should outline in the clause that should a discrepancy be found once the audit is completed, the landlord should not only rebates that amount, but they also cover the cost of the audit. Audit rights are extremely important in a market where operating increases continue to increase.   

Restoration Clause

A restoration clause is designed to make sure if a you make any additions or improvements to the space that are unlikely to be used by future tenants, that you remove these additions or “restore” the space back to its original condition. For example, if you were to install a stairwell in your space and a restoration clause was negotiated by the landlord, you would be required to cover the cost of the removal of the stairwell when you move out of the space. A savvy tenant rep broker broker can negotiate a clause into your lease stating that if the future tenant intends on using the improvement, then you are not responsible for its removal. If the landlord requires a restoration clause, you should be sure that your lease explicitly defines exactly what portions of the finish out fall within that clause.

For more about the terms and clauses that you may find in a commercial lease, read our article Your Guide to the Elements of a Commercial Lease.

7. Capping Your Operating Expenses

Operating expenses (op/ex) are a large part of your gross rent, and you want to make sure you fully understand what these include. Operating expenses are made up of three main items:

• Property Taxes
• Insurance
• Common Area Maintenance (CAM) Fees

In the Austin market, operating expenses are growing at a rapid rate, primarily because of increasing property values and resulting tax hikes. While property taxes and insurance rates cannot be controlled by the landlord (and therefore cannot be negotiated or capped), CAM expenses are controllable and therefore should be a part of your negotiation. Your tenant rep broker should negotiate for annual caps on how much your CAM expenses can increase (typically between 5 - 7%). To learn more about what is and isn’t included in operating expenses, as well as how op/ex caps work, read our article What Are Commercial Real Estate Operating Expenses?

In addition to annual op/ex caps, you can negotiate limits on property management fees to make sure they are in line with similar buildings.  

8. Obtaining Building Signage

If it is important to your company to have your company logo prominently displayed at your location, your tenant rep broker can negotiate for signage rights. Typically, landlords will provide a building directory and suite signs at no additional charge; this should be negotiated by your broker during the proposal stage. However, if you desire more prominent property signage, such as monument or building signs, this is something that your tenant rep will need to negotiate as a part of your concessions. Generally, this is something that comes more easily to larger, long term tenants. It is important that your broker help you fully understand the building signage specifications, as well as the cost (if any) to you to install and remove the sign upon lease termination.

 9.Outlining a Favorable Workletter Agreement

A workletter agreement is designed to outline what Tenant Improvement allowance was agreed to and spell out whether you, the tenant, are to complete the work and get reimbursed by the landlord, or if the landlord will complete the work for you.    

It is ideal to obtain the right to hire your own project manager so that you can have control over the schedule as well as the budget. Additionally, your broker should ensure that if you hire your own project manager, you are not liable to the landlord for any additional construction management fees. 

It is also important to negotiate how the money is dispersed. Most tenants do not want to pay out of pocket only to get reimbursed. Assuming this is true, your broker can help you negotiate terms so that the landlord will pay the contractors directly, even if you have hired your own project manager and team.  

Finally, it is crucial that you fully understand the approval process within the workletter. If you miss dates, it can back up the project, causing expensive delays, and mean that your occupancy may be delayed. Your tenant rep broker should discuss the approval timeline with you to settle on an acceptable schedule so that you can avoid incurring these delays.

Hopefully, you now understand just how helpful enlisting a tenant rep broker can be.

Additionally, we hope that you know that just because your lease expiration isn’t around the corner, it’s never too early to engage a tenant rep to help you analyze your current real estate situation and evaluate your needs.

If you’d like to talk about your current commercial real estate stresses and needs, please, schedule a consultation to talk to one of our tenant representation experts today. They’re ready to help you find the solution that will work for you.

Or visit our learning center for more helpful articles about finding office space and hiring a tenant rep broker. Visit aquilacommercial.com/ala.

- Article written and generously provided by: Kristi Svec Simmons, SIOR 

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Calendar of Events

•  July 11, 2018   
  • Small Firm May Meeting at the Austin Bar Association Mockingbird Room

•  July 26, 2018   
  • Lunch & Learn at Headliners
    • Eden Minucci, CLM, SHRM-CP is a legal industry veteran having worked in various law firm roles for over twenty years. Come join us as we discuss the soft skills that nobody in the firm wants to talk about. Join in on a lively discussion utilizing Patrick Lencioni's "The Ideal Team Player" as a guide to resolve existing issues and help us to grow better teams at our firms. 

LOOKING AHEAD

•   August 16, 2018  
  • Austin Chapter's Business Partner Legal Expo and Educational Seminar at the Intercontinental Stephen F. Austin 
    • Join your fellow chapter members for a half-day of legal education and business partner exposition. Bring along the decision-makers for all aspects of your business in order to maximize the value of the exposition. Enjoy lunch and two educational sessions TBA. 

• October 18-20, 2018   
  • Regional Legal Management Conference at Hilton Austin 
    • This conference will serve the Western regions of ALA International and will provide attendees with ample educational and networking opportunities, roundtables, and the lastest information about legal management products, services and technology. Registration is now open. Early-bird rates end on September 16th. Find out more here. Remember to use the hashtag #alaregionalaustin on social media to enter the drawing to win a free registration to the regional conference! 

• November 8, 2018   
  • Business Partner Appreciation Happy Hour at Fleming's Downtown
    • Take a moment to celebrate our business partners and thank them for their continued support, without which we wouldn't be able to survive. Cheers to the BPs! 

• November 10, 2018   
  • Light the Night Walk at Circuit of The Americas 
    • Join us for this annual event to raise awareness and support for the Leukemia Society. 

 CLICK HERE TO SEE UPCOMING
 ALA NATIONAL webinars AND EVENTS

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Items of Interest

A variety of Articles & Resources to help you develop your skills and enhance your career. 

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