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THE TERM "ANCHOR TENANT" describes large department stores, "power retailers" or "superstores," supermarkets, and other large retail tenants whose rents are typically used by the landlord to obtain shopping center financing. Anchor tenants have far more negotiating leverage than the typical small tenant, and anchor tenant leases contain dramatically different terms, more favorable to the tenant, than those that a small tenant is generally able to obtain. This article presents the anchor tenant's perspective on the principal issues that will be the subject of a typical lease negotiation.
At the outset, note that the anchor tenant will generally insist on using its own standard lease form as the basis for the final document. In this way, the anchor tenant will set the agenda, insure that all of its issues are addressed, and place the burden on the landlord and is counsel of reviewing a lengthy lease document.
BASIC BUSINESS TERMS * As a business matter, the anchor tenant's lease will typically provide for a long term of years; an initial lease term of 20 years or more, with several successive extension options, is not uncommon. The landlord will require this sort of long-term lease obligation from the anchor tenant to demonstrate sufficient credit resources to obtain financing. The anchor tenant, having decided that the location is a desirable one, will want to control it for a substantial period of time. However, the anchor tenant is unlikely to stop there, and will want to fix rent levels for both the initial term and the optional extension periods.
The anchor tenant will try to avoid provisions that provide for rent adjustments based on market conditions, even in connection with extension options. Instead, the anchor will try to lock in favorable rents at the time the lease is signed, perhaps agreeing to adjustments based on an inflation index.
The anchor tenant probably sees itself in part playing a long-term real estate game, while the landlord is focused on the short-term need to sign a lease to obtain financing or fill a vacant store. Also, the landlord will be comforted to some extent that percentage rent payments will provide participation in the upside appreciation of the property's value over time.
NOTICE DEADLINES AND REMINDER NOTICES
As a footnote...