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HOW TO SAY NO

If I gave you one, I’d have to give one to everybody else.” That is the essence of the argument that real estate lawyer Alfred G. Adams Jr., a partner in the Atlanta office of Sutherland Asbill & Brennan, sometimes uses to establish a largely “exclusiveless” shopping center. In the beginning stages of a lease-up, Adams often faces a coterie of national tenants, each noisily demanding its standard exclusivity clause — that is, a guarantee written into the lease that the retailer will have the exclusive right to sell a particular product or line.

Instead of negotiating for each request, his response is to tell the tenants that no traditional exclusives will be granted. To give them peace of mind, however, he structures the lease so that in the event the landlord violates the agreement by giving any tenant an exclusive down the road, all previously requested exclusives for the other tenants would kick in automatically.

“We can say, ‘We cannot give you an exclusive, because if we did, then six other leases we’ve already signed will spring into effect and mess up the entire center,’” said Adams, whose clients have included Hendon Properties and Ben Carter Properties as well as Simon Property Group.

This “mutual assured destruction” scenario can have a tonic effect by convincing tenants that none of their fellow retailers will be given unfair advantage; the landlord simply has too much disincentive to give any single tenant an exclusive.

A tenant that refuses to go along with this approach can often be persuaded to sign a lease in which the landlord promises Best Buy, say, that it will never fill a dark space with a known electronics retailer, such as Circuit City. This is not technically an “exclusive,” but it provides balky retailers with some additional assurance, Adams says. It also reduces the landlord’s level of risk. Under a traditional arrangement, it would be incumbent upon the landlord to constantly police Circuit City’s exclusive on “electronics.”

With a tenant-specific rather than product-specific lease clause, if Barnes & Noble starts selling TVs, the landlord is not at fault, having agreed only to keep Circuit City out of the center, not to stop Barnes & Noble from morphing into an electronics store. E-books, anyone?

— JG