Pressure put on tenants - Philadelphia Business Journal:

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The collapse of heavy hitters suchas . Inc. and , routine layoff reports, limited credi and rising business bankruptcies have put office landlordx on the offense as they try to shield themselvesz from tenants that have the potential to hurttheit business. “Two years ago, you took for granted that a companyg was going to be in business said Steve Spaederof Ltd. “Whejn you see a company like Lehman go yousay ‘Gee. I better be more There’s definitely a new perspective.
” At , whicnh owns office properties in Center City and the asset managers are working even more closelgy with leasing agents to assess the credit worthiness of a saidJerry Sweeney, president and CEO. Security depositd are on the rise. Financialo and credit reports are analyzer on publiccompany tenants. Brandywinew will approach a private company’s lender to gaugw its debt load and reliabilitty inmaking payments, as well as double-check references.
“Wr are monitoring every piece of datawe can, and we are in many more conversationsd with our tenants than we used to be,” Sweeney “In today’s world, it’d even more of a challenge because the financial landscap is built on quicksand.” While these landlordd have made it routine practice to find out all they can abouft tenants, their efforts have been rampedc up. Landlords are scrutinizing existing and prospective reviewing their businesses and getting a solid understanding of businesds plans andcredit history.
monitors any informationh — whether it’s from a competitor, industry insideras or other brokers — that migh shed light on the condition of a Liberty has started to scour its portfolipo to see if it has any trouble tenantds it needsto monitor. It has had a few tenants that have hit some bump s voluntarily approach them to see what kind of dealsz can beworked out. “If 2008 taughf us anything, it’s whatever you think can’yt happen might happen,” said Bill Hankowsky, Libertuy president and CEO. “It happens in today’x world very quickly.
We want to be as currentf in a real-time sense about any informatiojn that will help us make a moreintelligentt decision.” In some cases, landlords have increased the security deposits required by tenants. For BPG recently requested a deposit that was more thana year’es rent, surprising the tenanrt and causing it to question whether to do the Spaeder said. The hefty financial outlay made by a landlord to pay for expensive tenanyt improvements and commissions makes them even more circumspect abour theirbusiness relationships.
“There’s absolutely more stringent analysis regardin gspending [tenant improvement dollars] and commission dollars becaused you want to make sure if you’re putting money out that the tenantr is going to be therre to pay the rent,” he To track layoffs or possible troubled with a tenant, Liberty and Brandywined look for subtle, but signs. For example, whether an inordinatew number of key fobs have been returned as well as fullor half-fille parking lots. Film at buildings with recordede security cameras can be reviewed to see employede activity during morning andevening rushes.
Maintenance crews frequentl y walkthrough offices, taking notice of the numberd of employees milling about and cubicles filled or Even when the maintenance crew is doingh a simple task such as changing a light bulb, they scan an offic to pick up any physical hints of something amiss. “If there’s a third of the space empty, then there’a a pretty good indication that something is going Sweeney said. Landlords aren’t the only ones trying to protectf themselves. Though defaults by landlords has so farbeen low, tenantds still worry.
Some tenants have started to requesy the financials of especially private onesthat don’gt have to report to the Securities and Exchangd Commission, before completing a deal to ensure the landlor d can fund office improvements or even regulare maintenance of a building. Also making a comebackj are requestsfor set-off rights, whicuh allow a tenant to withhold paying rent if a landlorx doesn’t meet its obligations.