Zeidel & Associates’ Understanding of Office Leasing and Hospitality Provides Guidance to Largest Publicly Traded Developer

Situation

Zeidel and Associates was hired by the largest publicly traded developer/office building owner in the United States to assist with finding a management company to provide and oversee upscale food and beverage and conference facilities in one of the most iconic New York City office towers.

Initially, the owner engaged its existing outside real estate counsel that handles most of its leasing, but the agreement being negotiated with the management company was more akin to a hospitality contract, so the firm did not know how respond to the management company’s markup. This delayed negotiations and could have affected the timeline of the entire project. Frustrated, the building owner replaced its firm with Zeidel & Associates because of our vast experience in real estate leasing and hospitality and our understanding of how to navigate the arrangement being contemplated.

Approach

Our team promptly reviewed the manager’s remarks, which we perceived as aggressive. We then provided our client with an accounting of the concerns raised, including the need for employee claim indemnification, which was a new concept for them since they were used to traditional office leases. To assist our client with evaluating the comments effectively, we explained the standards typical in the hospitality industry. We gathered input from various departments within our client’s company and external advisors, such as building management, insurance, privacy, intellectual property, and accounting. Additionally, we consulted with all relevant stakeholders to obtain their feedback on the proposed changes.

Result

After a protracted negotiation with the management company and much soul-searching, our client chose not to proceed with the transaction. Instead, they elected to retain a food and beverage vendor currently servicing one of its other properties under an agreement that could be easily replicated.

The liability the management company wanted our client to assume was too significant for their comfort level. While we would have liked to advance the transaction, the added value we provided in helping our client understand and assess the risk to make an informed decision for their operation was a successful engagement for us and our client.