Between COVID-19 and the government’s shut down of the city of New York and its real estate, the disaster that hit New York had never been seen before. For the skyscraper that is the subject of this case study, almost 50 percent of the commercial tenants stopped paying rent or completely moved out of the building and terminated their leases. For those tenants not paying rent, many of the leases had self-help clauses that allowed Adam Leitman Bailey, P.C. to avoid the use of a court system that for most purposes had been shut down. The firm used peaceable self-help measures to regain possession. However, there were no new tenants lining up to take the spaces in either retail or office. This had been going on throughout the state of New York and Adam Leitman Bailey, P.C had come up with different ways to handle negotiating with the tenants, through pre-negotiation agreements, payment plans, sharing in profits, and many other scenarios that seemed to lessen the bleeding. However, many of these buildings either had a mortgage or were ground tenants, and the lender or the ground lessor wanted payment. For this company, this building had been built by the ground tenants about 70 years ago and was its trophy asset. It has always been the plan and the intention for the firm’s client to buy the property from the landlord and it was time to do that or at least extend the lease. Unfortunately, the client now had bigger problems, as it could not, for the first time in its history, pay its rent as a few of the larger tenants made up a majority of the rent roll, and its largest tenant announced to the press it would only be paying a small percentage of its rent during the pandemic.
Adam Leitman Bailey, P.C. was called upon to obtain a rent abatement for the building so it could survive the crisis. From reading past correspondence from the 2008 crisis when an abatement was completely rejected and all discussions refused, the firm’s clients expected the same result and had reached out to the building owners a year before and received a similar welcoming. Adam Leitman Bailey knew this time was different and that he needed to learn everything he could about the owners to understand their passions, hobbies, past experiences, and reasons for waking up in the morning to truly be able to negotiate or have the ability to create a negotiation. Since the owners were an overseas Chinese company and the world was in the middle of a pandemic, the task was made even more difficult. Adam Leitman Bailey assigned two associates to find everything they could about the targets. Nothing was too small or odd; Adam Leitman Bailey asked for weekly meetings and organized spreadsheets for each person and matter. Thankfully, the owners had been litigious so the team was able to obtain deposition transcripts that revealed so much about everyone involved in ownership. This allowed the team to find out their go-to attorney, their motivations for acting the way they did, and their approach for Adam Leitman Bailey, P.C.’s request for an abatement of rent in a way that had the possibility of working. Adam Leitman Bailey, P.C. had gathered thousands of pages of materials and put together a book of data to assist in the endeavor.
The first step had worked. Adam Leitman Bailey, P.C. had contacted the right person, an attorney, who promised to get in touch with the owners and see if she could help with the problem. She got back to the team with instructions of what she wanted and the way she wanted it with specific instructions, financials, done in a certain way including certain information for a number of years. Adam Leitman Bailey had already asked the client to collect much of this information and had their accountant working on it already so we quickly turned around the request and backed up the data for the information we provided. However, the firm did not hear back for two months, and the firm was asked for more information again. Adam Leitman Bailey calmed the client down comparing it to previous correspondence where at least now they were interested in speaking to the firm which should give the firm/client hope. Adam Leitman Bailey, P.C. supplied the additional information. Then the firm was sent to a new set of persons to work with the actual number on the abatement. Adam Leitman Bailey kept telling himself that this is one of the largest buildings in the country and therefore Adam Leitman Bailey P.C., should not be surprised by the level of detail but this had not been his first rodeo and he began to become concerned that maybe ulterior motives were in play. But each time the team dressed up the data the owner came right back asking for more detailed information. The team had numerous calls at all hours of the day, night, and weekends as they waited impatiently for responses, but now they knew an abatement was in play and it was only a matter of how much.
Adam Leitman Bailey penned a letter explaining how it benefited both ground lessor and ground tenant to do this deal. He listed the reasons the ground lessor would want a vibrant occupied building running and working, he compared the building to similar buildings in the neighborhood and presented how well this building was doing collecting rent and retainer tenants compared to others.
The letter did its job.
The abatement offer was for a number of years at a very large number. This did not happen on the first try but with a little pushing in certain directions to make sure that the client would be able to survive and do well no matter the market. The client wrote a heartfelt thank you letter to the entire team, but Adam Leitman Bailey knew that it was not for him to take credit as it was truly a team effort. Victories did not come from just surviving.
Adam Leitman Bailey negotiated the abatement and Danny Ramrattan and Marianne Sanchez computed and completed the research assignment.
