News outlets have recently reported that numerous Sears locations will be imminently closing. Our readers are most likely aware that Toys R Us has closed all of its locations due to its bankruptcy filing. Both Sears and Toys R Us would be considered anchor tenants by commercial landlords. An anchor tenant leases a large square footage space or is of the nature of a large and influential company such as Starbucks or Apple. Anchor tenants such as department stores and movie theaters draw customers to the mall or shopping center, so that the same customer continues to shop at the premises and patronize its other businesses. Once an anchor tenant closes, the landlord should seek to locate another anchor tenant to fill the vacant space, so that the shopping mall will draw customers to the anchor location and benefit the other businesses in the mall by drawing shoppers. This post will examine the provisions that a potential anchor tenant will ask its attorney to have included in a lease.
Exclusive use can often be demanded by an anchor tenant. Should Bed Bath and Beyond be the proposed tenant, it may require in its lease that the landlord may not lease another space in the shopping center to a tenant that sells home décor, bedding, kitchen equipment and the like, so as to minimize competition that may hinder its business. Should the landlord violate such an exclusive use provision, the tenant’s lawyer may have negotiated a rent abatement and right to terminate the lease. In addition, many anchor tenants present their own form of lease to the landlord, rather than sign the landlord’s version of the lease.
Signage is very important to anchor tenants. Anchor tenant leases may include a provision that the anchor tenant must always be the first name on mall signage and be of the largest font size. Visibility of signage is also important, so that the anchor store’s name is listed on internal building directories, directional signs throughout the mall and the like.
Protected areas are often sought by anchor tenants. This means that there is a separate and exclusive entrance to the anchor store that does not require customers to walk through the entire mall to approach the anchor store. Anchor tenants can expect that the landlord cannot install walls or landscaping that blocks the view of the store within the protected area. Should the anchor store be of the nature of The Cheesecake Factory, the anchor tenant may be successful in negotiating that a food kiosk cannot be installed within a certain range of the entrance to the anchor store.
Sears and Toys R Us have “gone dark” in many locations. Anchor tenants often negotiate the right to go dark so long as rent is paid for a certain period of time. Tenants may also desire the ability to close the location to make improvements or repairs to enhance the space and the customer experience. In response, the landlord may request the right to take back the space in order to lease to another tenant if the tenant goes dark.
Co-tenancy clauses, lease provisions that concern other tenants besides the anchor tenant, are also common in anchor tenant leases. The anchor tenant will thrive if other tenants in the mall are of a particular quality, are open particular hours corresponding to the anchor tenant and if the mall is fully or substantially leased. Attorneys for anchor tenants often request that the anchor tenant can terminate the lease if the landlord has not leased a particular percentage of the spaces in a newly constructed shopping mall by a certain date, so that the mall is a vibrant location for shoppers.
Easy access to parking is important for anchor tenants. The lease should contain provisions such as free parking or discounted parking for the patrons of the anchor store. An exclusive parking area may also be desirable in order to provide shoppers with ease of access to the anchor store. Of course, the number of parking spaces should be indicated in the lease with penalties to be incurred by the landlord if the number of parking spaces is reduced during the lease term.
Whether or not your business is an anchor tenant, or is located in a shopping area affected by an anchor tenant, our firm is prepared to negotiate your lease in a manner most favorable to you.