Extracting value from an exclusive
May 7, 2017
There is no question that a tenant benefits from being granted an exclusive use in a shopping center. More often than not, an exclusive ensure that no other tenant in the shopping center shall have the same use as tenant granted the exclsuive. (Occasionally, an exclusive shall read something to the effect of 「There shall be no more than two other jewelry stores…」 Still something of an exclusive, it is a little less burdensome on the landlord.)
Traditionally, the tenant benefits from the exclusive, and the landlord has yet another restriction, limiting its leasing options. It 「costs」 the landlord. However, there is language that we see occasionally that does, to a certain extent, assign a value to the exclusive.
It will read something to the effect of:
As long as tenant is operating as a ______, there shall be no other ______ in the shopping center. If landlord wishes to lease to another _____, landlord will notify tenant. Tenant shall have 10 days to notify landlord whether it wishes to enforce the restriction against another _____ from operating in the center. If the tenant elects to enforce this restriction, tenant’s Base Rent will immediately increase by $5.00/sf for the remainder of the term and landlord will not lease to the another _____. However, if the tenant does not respond within 10 days, or the tenant elects not to require the landlord to enforce the restriction, this exclusive shall no longer apply and the landlord shall be permitted to lease to another _____.」
Beautiful language turning a typically non-financial covenant into a financial covenant!