M

Market Rent: The amount of rent being paid under leases for a comparable lease term at properties which are comparable in terms of size, location and quality. Market Rent is often used to define the rent to be paid by a tenant upon exercise of a renewal option, expansion option or right of first offer. Some leases include a provision for the determination of Market Rent if landlord and tenant cannot agree, including the submission of the determination to arbitration or appraisal.

EXAMPLE: ABC Tenant has a five-year renewal option for their premises at Ellipsis Tower with Base Rent for the renewal term to equal 95% of Market Rent. Ellipsis Tower is a Class A office building. By research of the local market area, the Landlord determines that five-year leases in competing Class A office buildings are currently being written at a Base Rent of $20.00/sq. ft. gross with a $5.00/sq. ft. tenant improvement allowance. In accordance with the terms of ABC's lease, the Market Rent for the renewal term would be established at $19.00/sq. ft. gross ($20.00 x .95).

Media Fund: A fund established by the landlord of a retail property whereby tenants are required to make specified contributions to the fund for the purpose of promoting the property in the local media. The fund is managed by the landlord and, in many instances, the landlord is required to make a defined number of promotions per year.

EXAMPLE: ABC Retail Tenant has a lease clause which requires that a Media Fund contribution be made in an amount equal to the lesser of $0.50/sq. ft./annum or $1,000/annum. Upon collection of the Media Fund contributions from ABC and all other tenants of Ellipsis Mall required to make such a contribution, the Landlord places advertisements for Ellipsis Mall in the local newspaper and on local radio stations.

Merchant Association: An association organized by a landlord of a shopping center but operated jointly by landlord and tenants of the center which collects funds for use in the advertising and promotion of the center to the benefit of all tenants. In many instances, the landlord is required to match a specified percentage of the Merchant Association Dues received from tenants.

EXAMPLE: ABC Retail Tenant has a lease clause which requires that ABC participate in the Merchant's Association at Ellipsis Mall so long as 75% of the other mall tenants are also required to participate, and pay dues equal to $2,000/year, subject to annual increases equal to the increase in the Consumer Price Index. The lease also requires the Landlord to make a matching contribution on a quarterly basis equal to 25% of the dues received from all contributing tenants. ABC Retail Tenant is allowed to have one member serve in the association. All members meet once a month and determine how the funds collected from tenants and the Landlord should be spent to promote the mall and increase customer traffic therein.

Month-to-Month: A lease agreement extendable or cancellable by either the landlord or the tenant on a monthly basis.

EXAMPLE: ABC Tenant currently leases office space in Ellipsis Tower, but is running out of storage space. The Landlord has some available storage space in the Lower Level of the building. Because ABC does not know how long it will require such space, the Landlord leases one of the storage spaces to ABC on a month-to-month basis, with either party having the right to cancel the storage space lease upon 30 days notice to the other party, without penalty.

Move-in Date: The date upon which a tenant takes physical possession of the Leased Premises for the conduct of its business thereupon. Such date may or may not correspond to the Commencement Date.

Move-out Date: The date upon which a tenant relinquishes physical possession of the Leased Premises. Such date may or may not correspond to the Expiration Date.

N

Natural Breakpoint: The amount of Gross Sales which, when multiplied by the Overage Percentage, equals Base Rent (stated differently, a natural breakpoint is calculated as Base Rent divided by the Overage Percentage).

EXAMPLE: ABC Retail Tenant signs a five-year lease which requires ABC to pay Base Rent of $50,000/year plus Percentage Rent in an amount of 4% of Gross Sales in excess of a natural breakpoint. The breakpoint in this example would be $1,250,000, calculated as $50,000 in Base Rent divided by 4%.

Net Lease: A lease type whereby the tenant is responsible for the payment of its proportionate share of all recoverable expenses of the building. Such recoverable expenses are excluded from the calculation of Base Rent. In other words, the Base Rent received by the landlord is net of expenses.

EXAMPLE: ABC Tenant signs a five-year lease which requires ABC to pay Base Rent of $12.00/sq. ft. plus its proportionate share of recoverable expenses. During the first year of the lease term, recoverable expenses equal $9.00/sq. ft. ABC would be required to pay Expense Recoveries in the amount of $9.00/sq. ft. This is an example of a Net Lease, because the Tenant is responsible for its proportionate share of all recoverable expenses for the building.

Non-Disturbance: A lease provision which grants a tenant the right to remain in occupancy of the leased premises regardless of a change in the ownership of the property, so long as the tenant continues to fulfill their lease obligations. While non-disturbance language is included in most leases, some leases obligate a landlord to obtain a 'Subordination, Non-Disturbance and Attornment Agreement' from a mortgage holder or ground lessor, whereby such mortgage holder or ground lessor agrees not to disturb tenant's occupancy of the premises in the event of foreclosure as a condition to tenant's subordination of their lease to the mortgage or ground lease.

EXAMPLE: ABC Tenant's lease at Ellipsis Tower contains a non-disturbance clause whereby ABC agrees to subordinate its lease to any mortgagees so long as any current or future mortgagee agrees to provide ABC with a Non-Disturbance Agreement providing that ABC's tenancy shall not be disturbed in the event of foreclosure. The Landlord of Ellipsis Tower defaults under their mortgage with Lender One, and Lender One forecloses on the mortgage. Because of the Non-Disturbance Agreement between Lender One and ABC, Lender One is bound by the terms of the ABC lease even though Base Rent is currently significantly below market rent.

Notification Date: The date by which either the landlord or tenant must provide notice to the other party that they wish to exercise a lease clause, typically an option.

NRA: Abbreviation for Net Rentable Area, and defined as the measurement of a building or suite upon which rent is calculated.