StillwaterCrossing

by Greg Brenny, Fafinski Mark & Johnson, P.A.Feature

MSCA Connection February 2011msca-online.com

Minnesota Shopping Center AssociationVol 25. No. 2

1

Exclusives – Clearing Up the Ambiguity

FEBRUARY 2011

In this Issue

Exclusives -------------- FEATURE 1Stillwater Crossing ---- SNAPSHOT 1Gordmans ------------ HOT SPOTS 3Lawrence/Johnson MEMBER PROFILES 5MSCA Board ------ COMMITTEE CHAT 5Retail Panel ------- PROGRAM RECAP 6

If you have been involved in a retail center, you likely haveanalyzed, negotiated, drafted or litigated an exclusive.Exclusives, a category of restrictive covenants, prohibit

certain uses for the benefit of a specific party. Unfortunately,exclusives are often ambiguous, causing unintendedconsequences and confusion. They can be difficult to draftand interpret and are not always easy to find. In retailcenters undergoing change, they can stop change in itstracks.

If carefully negotiated and drafted, exclusives can beintegral to the success of a retail center by helping toprovide the correct retail mix. Exclusives should attempt tobalance the interests of landlords and tenants. An exclusivemay be necessary to protect a tenant’s business andprovide incentive for a tenant to locate at a retail center.Conversely, an exclusive should allow landlords the flexibilityto create a retail mix that results in a competitive edge forthe retail center. Clear exclusives can both protect tenantsand provide landlords flexibility.

Underlying LawWhen clear and unambiguous, Minnesota courts willgenerally enforce exclusives as intended by the parties whocreated them. However, courts are inclined to narrowlyconstrue exclusives based on public policy against restraintson trade with all doubt resolved against enforcement. As aresult, exclusives will likely be narrowly interpreted ifambiguous. Ambiguity should have the effect of limiting theprotection provided by the exclusive. Often, the underlyinglaw will work against the tenant wanting the protection ofthe exclusive.

Narrowly Tailor and Clearly DefineThe first and one of the most important steps is to narrowlytailor the exclusive and define terms with as little ambiguityas possible. Review each word used in the exclusive todetermine if it needs further definition. Define evensomewhat ambiguous words and phrases so that anyonecan understand what is meant. Don’t rely on impliedconduct and standards of the trade. When in doubt define.

Location: SEC of MN Highway 36 and Osgood Avenue, OakPark Heights, MNMonth/Year Opened: 1965 / Renovated 2010Owner: Stillwater Crossing LLCManaging Agent: NorthMarq Management ServicesCenter Manager: Ron VantineLeasing Agent: Kim Meyer, Robert Muir Company, (952) 857-2805Architect / Construction Contractor: N/AGLA: 15,047 sfCurrent Occupancy: 77%# of Stores: 5Anchor Tenants: Carbone’s Pizzeria, Metro Dentalcare, LiquorTimeMarket Area Served: Oak Park Heights and StillwaterWebsite: www.robertmuircompany.comAdditional Facts: 2,550-sf end cap available with pylon signageon Highway 36. Drive-thru possible depending on the use.Also, 940 sf between Carbone’s Pizzeria and Liquor Time isavailable.

Snapshot

Connection

2011 SponsorsACI Asphalt Contractors, Inc.American Engineering Testing, Inc.Aspen Waste Systems, Inc.Bremer Bank, N.A.BrookfieldCB Richard EllisCSM PropertiesChuck & Don's Pet Food OutletDoran ConstructionFaegre & Benson LLPFendler Patterson Construction, Inc.Fredrikson & Byron, P.A.Gray Plant MootyGreat Clips, Inc.H.J. Development, Inc.Inland Real Estate CorporationJones Lang LaSalleKraus-Anderson CompaniesLarkin Hoffman Daly & Lindgren Ltd.Lawn RangerLeonard, Street and DeinardM & I BankMFRA, Inc.McGladreyMesserli & Kramer P.A.Mid-America Real Estate –Minnesota, LLC

Midwest Maintenance &Mechanical, Inc.

Minneapolis/St. Paul BusinessJournal

Minnesota Real Estate JournalNorthMarqOppidan, Inc.The Opus GroupPaster EnterprisesRLK IncorporatedReliable Property ServicesRelianceDevelopmentCompany, LLPRobert Muir CompanyRyan Companies US, Inc.TCF BankTCI Architects/Engineers/Contractor, Inc.

Target CorporationU.S. BankUnited PropertiesVenture Mortgage CorporationWells Fargo Bank, N.A.Welsh CompaniesWestwood Professional Services, Inc.Wipfli LLP-CPAs & Consultants

msca-online.com MSCA Connection February 2011

Exclusives - continued

2

continued on page 7

Try to give exclusive sales clauses that allowthe exclusive right to sell certain products orservices rather than exclusive use clausesthat allow the exclusive right for a certaintype of store or use. An example is anexclusive for the sale of food (exclusive salesclause) versus grocery store (exclusive useclause). Exclusive sales clauses are moreprecise if properly defined. Exclusive useclauses are more prone to interpretiveproblems. Types of stores are not easilydefined and the exclusive becomesambiguous. With so many stores selling sucha variety of products, stores can be classifiedas many different types of stores or havingmany different uses. For instance, a bagelshop selling coffee could be defined as acoffee shop (in addition to a bagel shop) forpurposes of a coffee shop exclusive.

Specifically list the products or servicesprotected by the exclusive. Focus onlimiting the exclusive to only include theproducts or services that are a tenant’sprimary business. Narrowly craft languagethat protects the primary business fromcompetition but does not expand tosecondary or complementary products orservices. Never include incidental or relateduses in the exclusive. Usually, the exclusiveshould be narrower than the permitted useof a tenant.

If a type of store or use cannot be avoidedfor an exclusive, try to further define the typeof store or use as much as possible. Considerqualifying the type of store or use as beingtenant’s primary or principal business. Thenfurther define primary or principal business asthe use of a certain percent of sales floorarea or a certain percent of revenue.

If possible, do not adopt a tenant’sstandard exclusive provision without athorough review. Although anchor andstrong tenants may insist on their standardexclusive provision, it may be antiquatedand broader than the current reality. Forinstance, if you are dealing with a grocerystore exclusive that prohibits the sale ofgroceries, there are two elements beingprotected. Groceries are defined as“articles of food and other goods sold by agrocer.” Since a grocer is commonlydefined as a dealer in staple food stuffs andmany household supplies, this means thatboth food and non-food items qualify asgroceries. The non-food items prohibitedfrom being sold could be virtually limitless(e.g. soap, paper towels and aspirin). Manygrocers realize that such a broadprotection is not beneficial to their business.In these situations, a well reasoned revisionto a tenant’s standard exclusive provisionmay be acceptable.

Exceptions to the ExclusiveExceptions to the exclusive are important.Exceptions also need to be clearly draftedso that they are proper in scope.Overbroad and unclear exceptions cancause an exception to swallow theexclusive and make it moot. Someexceptions to consider are as follows:

Incidental Sales Exception - An incidentalsales exception allows for the incidentalsales of protected products that wouldotherwise be prohibited by an exclusive.Without an incidental sales exception, anexclusive will often extend farther thananticipated. For the incidental sales ofprotected products, try to define theallowed incidental sales area by squarefeet rather than a percent of sales. Asquare foot standard is easier to review forcompliance. Percent of sales is difficult toreview for compliance because othertenants subject to the exclusive wouldneed to report sales to the landlord by thecategory of the protected product. Suchcategories are rarely available to thirdparties and may not even be tracked bythe tenant subject to the exclusive.

Using square feet to calculate the allowedincidental sales area of protected productsrequires further definition. Make sure toinclude whether the allowed incidentalsales area is for all protected products inthe aggregate or for each protectedproduct. Also, make sure to clearly statehow to measure the allowed incidentalsales area for the protected products.While measuring the square feet involvedseems straight forward, landlord and tenantmay have vastly different methods ofmeasuring the allowed square footage. Asuggestion is to measure usingfixtures/gondola area.

Existing Tenant Exception - Anotherexception to consider is an existing tenantexception. Without such an exception,conflicts will likely arise between theexclusive being granted and the permitteduse clauses of existing tenants. Ideally, toavoid any issues with existing tenants, anexception to an exclusive should be madefor all existing tenants operating aspermitted under their lease. However, this isa large exception to an exclusive, becausebroad permitted uses under existing leasesthat are freely assignable may lead tochanges in use that pose direct competitionthreats to a tenant. One way to slightly limitthis exception is by adding language that ifa landlord’s consent is required for a usechange, then landlord shall not consent toa change that will violate the exclusive.

MSCA Connection February 2011msca-online.com 3

Gordmans stores, an Omaha-basedapparel and home fashions retailer,will be entering the metro retail

marketplace this spring by opening twostores. One of these stores will be located inthe former Steve & Barry’s space atBurnsville Center which had most recentlybeen occupied by Becker FurnitureLiquidation Superstore. According toFinance & Commerce, the second store willbe located in the former Cost Plus WorldMarket and Bed Bath & Beyond spaces atTamarack Village. Both stores will containapproximately 50,000 sf which is the typicalprototype for this retailer.

Gordmans currently operates one store inMinnesota located across from RiverdaleCenter in Mankato. Its national portfolioincludes 68 locations in 16 states in theMidwest and over 1/3 of those stores wereopened since 2004. All of its stores areleased and can be found in regionalenclosed shopping malls, lifestyle centersand power centers. The company has anaggressive growth plan of a 10% increase instore locations per year.

Gordmans was acquired by Sun Capital in2008 and then went public in August 2010.The company’s prospectus described itsbusiness as “an everyday low price retailerfeaturing a large selection of the latestbrands, fashions and styles at up to 60% offdepartment and specialty store prices

every day in a fun, easy-to-shopenvironment.” In addition to shoppingbrand name merchandise at low prices,the fun involved in shopping at aGordmans includes a visit to the GordmansGiggles children’s theatre and relaxing inthe sports-themed television viewing area.With entertainment thrown into theshopping experience, Gordmans indeeddoes live up to its moniker of “SomethingUnexpected.”

www.gordmans.com

by JoAnn Maloney, Fredrikson & Byron, P.A.Hot Spots

Gordmans - Something Unexpcted

MSCA “Third Thursdays”

Who: MSCAmembers andtheircolleagues

What: Casualnetworkinghosted by MSCA members

When: Third Thursday of every monthfrom 8:30–9:30 am

Where: Different locations throughoutthe Twin Cities—watch the MSCAnewsletter and website for locations

Why: Create synergy in the commercialreal estate industry—share ideas andstories and make new effectiverelationships

Next meeting:Thursday, February 17, 2011 atCaribou Coffee – City Centre Drive,8320 City Centre Drive, #B, Woodbury55125. MSCA member host isRyan Burke, Kraus-AndersonCompanies. Please join us for this funand casual way of networking aroundthe Twin Cities.

There is no fee for this event. Food andbeverage are not included. RSVP toStacey at sbonine@msca-online.com ispreferred, but not required.Hope to see you there!

Click fordirections

Love Is In The Air

� The average person will shell out$116.21 on traditional Valentine’s Daymerchandise this year, up 11% over lastyear’s $103.00.� Total Valentine spendingis expected to reach $15.7 billion.� Theaverage person will spend $5.04 on pets, upfrom $3.27 last year.� Consumers will alsospend on average of $6.30 on friends, $4.97

on classmates and teachers, and $3.41 on co-workers.� Greeting cardswill be the most popular gift option (52.1%) followed by jewelry, clothing,dining out, flowers and candy.� The average man plans to shell out morethan twice as much ($158.71) as the average woman ($75.79).� Discountstores (36.6%) will be the most popular shopping destination, but departmentstores (30.5%), specialty stores (19.4%) and online (18.1%) will share much ofthe holiday traffic as well. Others will check out their local florist (16.8%) andjewelry store (9.5%).� Source: National Retail Federation

FeaturedSponsors

ACI Asphalt Contractors, Inc.To provide our clients withunique, cost effectiveindustry leading solutions fortheir pavement needs usinga consultative approach.

Doran ConstructionTo use our experience tomanage the constructionprocess with a keen sense ofresponsibility for our client’stimeframes and bottom linewhile delivering a finalproduct that exceedsexpectations.

Leonard, Street and DeinardOur mission is to be a law firmthat provides wise counseland practical advice in orderto help our clients efficientlyand successfully achievetheir objectives and goals.Professional excellence,exemplary client service,respect, teamwork,commitment, civicresponsibility and hard workare values that informeverything we do atLeonard, Street and Deinard.

Oppidan, Inc.To be the leading merchantreal estate developer ofcommunity shopping centersin the Midwest, providing ourcustomers retail space for thelowest possible cost with ouropen book developmentapproach and processes.

TCF BankTo provide its customersinnovative products throughmultiple banking channels,with a focus on conveniencein banking.

Target CorporationTo be the best companyever for our guests, teammembers, shareholders andcommunities.

�� Shakey’s Pizza is returning to Minnesota after a 10-year absence. Withfive locations slated for the Twin Cities area, the first is expected to land inPlymouth around April.

�� After a fire that destroyed the building that housed Blackbird andHeidi’s in South Minneapolis, both businesses have relocated andreopened. Blackbird’s new home is at 3800 Nicollet Avenue S., andHeidi’s opened in January at 2903 Lyndale Avenue S.

�� Several restaurants have closed in the last few weeks, includingthe 501 Club,OM, Ringo, Palomino and Kieran’s Old Pub.

�� Turtle Bread Co. is opening a new location in theLongfellow neighborhood of Minneapolis.

�� The new Ellipse apartment complex at the corner of ExcelsiorBoulevard and France Avenue just announced that a newrestaurant has signed a lease on its ground level. The concept,Mill Valley Kitchen, is projecting an early summer opening.

�� Cocina del Barrio, an Edina-based offshoot of the wildlypopular Barrio tequila bars in Minneapolis and St. Paul, opened inDecember in the 50th and France retail development.

�� Little Caesars Pizza will open a 1,485-sf store in the EdenPrairie Prairieview Center. Hirschfield’s Paint has also signed a4,248-sf lease at Prairieview Center.

�� Pinstripes opened for business in 32,000 sf of space inCentennial Shops on France Avenue in Edina with their bowling,bocce ball, restaurant and bar concept.

�� The Excelsior and Grand development in St. Louis Park hasrecently signed several new tenants includingCVS/pharmacy,Bubbly Paws,Gourmet Oil & Vinegar andGet In Shape ForWomen. Three current tenants includingMax’s,Ocean’s Spa &Nail and The Hair District are expanding into larger spaces.�� Randolph Hill Shopping Center in St. Paul has just signed two newtenants: Rusty Taco and LA Nails.

�� The Refinery Salon & Day Spa has recently expanded theirDinkytown location.

�� Construction has begun on Smashburger in Eden Prairie in a newlyconstructed 7,625-sf shopping center at 8045 Flying Cloud Drive. The othertenants will include Verizon Wireless and Sports Clips.

msca-online.com

MN Marketplace

M A R K E T

Zelm Forms New Company. Linda Zelm, formerly Senior Vice President ofColdwell Banker Commercial Griffin Companies, has formed a new real estateservices firm, Small Business Real Estate Advisors. The firm provides commercialreal estate agency representation and consulting for companies with fewerthan 500 employees.

Stafford Joins Arthouse. Arthouse announced that Sara Stafford has joinedtheir team as Project Manager. Arthouse creates custom merchandise andapparel for promotions, events, and retail. Sara has over 25 years marketing,communications and sales experience in the commercial real estate industry.

Member News

Events

Feb 17 Third Thursdays NetworkingMar 2 TrendsMar 16 Business Day at the CapitolMar 17 Third Thursdays NetworkingApr 6 Economic OutlookApr 21 Third Thursdays Networking

For more info, please log on towww.msca-online.com

OFFICERSPresidentPeter Berrie, Faegre & Benson LLP1st Vice PresidentPaula Mueller, Northtown Mall/Glimcher Properties2nd Vice PresidentRonn Thomas, NorthMarqTreasurerEric Bjelland, NorthMarqSecretaryDana Andresen, Chuck & Don’s Pet Food Outlet

DIRECTORSTony Barranco, Ryan Companies US, Inc.John Dietrich, RLK IncorporatedJen Helm, NorthMarqAndy McDermott, Shea, Inc.Bob Pounds, Welsh CompaniesHans Rasmussen, Robert Muir CompanyJeff Wurst, Caribou Coffee Company, Inc.Immediate Past President (as Director):Stephen Eggert, Target Corporation

COMMITTEE CHAIRSProgramTom Goodrum, MFRA, Inc.Tom Moorse, HTG ArchitectsNetworkingWill Matzek, Kimley-Horn & AssociatesCindy MacDonald, Kraus-Anderson CompaniesNewsletterAndy McDermott, Shea, Inc.JoAnn Maloney, Fredrikson & Byron, P.A.AwardsTony Barranco, Ryan Companies US, Inc.Derek Naill, Associated BankLegislativeJack AmdalLeah Truax, NorthMarqRetail ReportJanet Goossens, Kraus-Anderson CompaniesMichael Broich, Target CorporationTechnologyJase Stumph, LS Black Constructors, Inc.Mark Robinson, Paster EnterprisesGolfRyan Burke, Kraus-Anderson CompaniesCindy Weber, Engelsma ConstructionSponsorshipJanele Taveggia, LEO A DALYShelly Muelken, Marketplace CommercialMSCA CaresZach Stensland, Welsh CompaniesHerb Tousley, Exeter Realty Company

STAFFExecutive DirectorKarla Keller Torp(P) 952-888-3490 (C) 952-292-2414 (F) 952-888-0000ktorp@msca-online.comAssociate DirectorStacey Bonine(P) 952-888-3491 (C) 952-292-2416 (F) 952-888-0000sbonine@msca-online.comExecutive AssistantDanielle Pelton(P) 952-345-0452 (F) 952-888-0000dpelton@msca-online.com

2011 Leadership

W A T C H

MSCA Connection February 20114

Press releases are printed based upon availability of space and relevance to the local market.

MSCA Connection February 2011msca-online.com

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MSCA Connection February 2011msca-online.com

FEBRUARY INSERT FEATURE: BURTON INSURANCE AGENCY, INC.

MSCA Connection February 2011msca-online.com 5

Primary Career Focus: Construction Coordination & ManagementHometown(s): Grew up in Fridley and spent 20 years in BemidjiEducation: Bemidji State University and masters work at Metropolitan UniversityFamily: Husband, Bob, two grown sons who live in Atlanta and Brooklyn, and two catsHobbies: Reading and cooking...more reading than cooking now!Very First Job: I worked at a soda fountain at Bridgemans, and no, you really don’t getsick of the ice cream!Dream Job: At this age, it would have to be a secure retirement!Secret Talent: I do a fabulous impression of a lizardFavorite Food: Rogan josh (Indian lamb dish)Favorite Quote: Grandmother to granddaughter: “To lose a husband or two in one’slifetime can be quite dreadful. To lose your teeth is a disaster!” ~from A Little Night MusicMentors: Robin Keyworth and Terry HodderFavorite Place Traveled: ParisMSCA Involvement: Newsletter Committee

Steve JohnsonSolomon Real Estate Group, Inc.

Judy LawrenceKraus-Anderson Companies

Member Profiles

New Members

Gregg KoskiKraus-Anderson Companies

Andrew PetkoffCB Richard Ellis

Rick FerraroSpectrum Sign Systems

Dawn BorgstromSpectrum Sign Systems

Karen MartinAssociated Bank

Matt AndersonRIC Property Management

Nicolle L. OgbourneHines

Ruslan BocanceaFirst American TitleInsurance Company

Ken SeifertJones Lang LaSalle

Gina FoxLeonard, Street and Deinard

Robert FenlonLeonard, Street and Deinard

Emilee DeCoteauCBL&AssociatesProperties, Inc.

This monthly column is dedicated to providing information tomembers regarding MSCA’s committees to help you decide howto become more involved. This month we focus on the ULTIMATECOMMITTEE—the Board of Directors. (Actually it’s not a committee, but humor me.)

The Board strives to continue the MSCA’s past success in providing networkingopportunities, industry-specific information (through the newsletter, monthly programs, andperiodic small-group learning sessions) and a strong voice at the state legislature. TheBoard helps establish the strategic vision for the MSCA and determine any newopportunities or services that the organization can provide to its members. The full Boardmeets quarterly, with the smaller, executive committee meeting during each of the othermonths of the year. Each Board Member is a dedicated MSCA member that cares deeplyabout the strength of the MSCA and its members. If you have any suggestions orcomments on ways to improve the MSCA, or want to share any concerns (orcompliments), please reach out to any of the Directors or MSCA staff.

Committee Chat by Peter Berrie, Faegre & Benson LLP

MSCA Board

OFFICERSPresident: Peter Berrie, Faegre & Benson LLP1st Vice President: Paula Mueller, NorthtownMall/Glimcher Properties

2nd Vice President: Ronn Thomas, NorthMarqTreasurer: Eric Bjelland, NorthMarqSecretary: Dana Andresen, Chuck & Don’sPet Food Outlet

DIRECTORSTony Barranco, Ryan Companies US, Inc.John Dietrich, RLK IncorporatedJen Helm, NorthMarqAndy McDermott, Shea, Inc.Bob Pounds, Welsh CompaniesHans Rasmussen, Robert Muir CompanyJeff Wurst, Caribou Coffee Company, Inc.Immediate Past President (as Director):Stephen Eggert, Target Corporation

Primary Career Focus: To develop a full range of product types committed to providingintelligent real estate solutions with creativity, flexibility and integrityEducation: Mankato State University. Majors in Marketing and Finance with minors inSpeech and EconomicsFamily: Wife Laurie, son Eric (22), daughter Krista (18)Hobbies: Pheasant hunting, fishingVery First Job: Chopping celery for a local Chinese take-out for $0.75 a crateDream Job: Canadian fishing guideSecret Talent: CookingFavorite Food: It doesn’t seem fair to limit myself to just one dish, so I love seafoodFavorite Book: All of the Vince Flynn novelsFavorite Movie: The Shawshank RedemptionMentor: My DadFavorite Place Traveled: AlaskaMSCA Involvement: Past Board of Directors, STARRSM Awards Committee, NetworkingCommitee

This month’s panel was comprised of four well-respected individuals from the local retailcommunity. Tricia Pitchford, Vice President of Retail for NorthMarq, Mike Sims, Principalfor Mid-America Real Estate Group – Minnesota, LLC, Richard Jahnke, Senior Leasing

Representative for Paster Enterprises, and John Johannson, Senior Vice President for WelshCompanies.

Who are the retailers doing deals?Over the past couple of years we’veseen a lot of activity in the consignmentand thrift store categories. Now we areseeing some movement towards moretraditional users.

Tricia indicated that she was seeingsome new yogurt and sub sandwichconcepts coming to life. Richard said thathis centers catered to smaller shops andhe was seeing activity in cell phone usersand Little Caesars. John is seeing activityin some mid-box users such as Staples, T.J. Maxx, Best Buy and Bed Bath and Beyond. Mikesuggested that activity in mid-box sized stores started coming back after the ICSCconference in June. It seemed that all panelists agreed that Walmart was the mostaggressive and active retailer at the moment.

What is happening to the length of time it takes to do a deal? Mike statedthat because there is not much in the pipeline, the approval time is fluid, whereas Triciapointed out that everything is now being negotiated from CAM rates to co-tenancyclauses and that this could drag out the process. She also noted that tenants aren’tdragging their heels at all, but much of the prolonged process was due to the lenders’requirements.

What is happening to store size requirements? Although Richard noted thatboth ALDI and Anytime Fitness were increasing their footprint, he felt that overall it seemsthat retailers are reducing their size whenever possible. John cited that this might be due tothe efficiencies developed in the delivery systems and that national retailers no longerneed to stockpile merchandise, because as soon as an item is sold, the distribution centeris sending a replacement. Examples of reductions in size include Bed Bath and Beyond’sprototype which is going from 45,000 sf to 36,000 sf and Walmart’s reduction in size by60,000-70,000 sf.

What is happening to rental rates? Tricia seemed to think that although the rateshad bottomed out, they wouldn’t go much higher in the near future. On the brighter side,she anticipates a reduction in concessions. She noted that there seems to be less free rentand lower tenant-improvement money required to close a deal.

John stated that we were back at 1999 rates and that tenants had become “addicted” torates in the $11 or $12 range and would find it hard to commit to the $18 rate associatedwith new development until all of the current inventory is leased.

Richard reminded the group that the landlord could do lower rents and shorter terms ondeals that required little or no landlord investment.

Why aren’t deals getting done? When asked this question by an audience member,two reasons were given: 1) The attorneys on both sides seem to be drawing out the processand it was felt that this could be improved if the two attorneys would simply talk to eachother instead of exchanging comments. 2) The lack of financing available to smaller retailersis a severe problem. Typically a small retailer could use the equity in their house to financethe venture, but now, with housing values declining, that is not a viable option. The othersource for funding has been SBA loans and those no longer seem to be available.

msca-online.com MSCA Connection February 20116

January 2011ProfessionalShowcase

DLR Group KKE

DLR Group and KKEArchitects joined forcesto increase service andexpertise in the retail anddevelopment markets.Together, they providethe same high level ofservice you areaccustomed to and offernew expanded expertisefrom across the country.

by Judy Lawrence, Kraus-Anderson CompaniesProgram Recap

Retail Broker Panel 2011:Deals, Trends and Outlook

January speakers l to rMike Sims, Mid-America Real Estate – Minnesota LLC

Bruce Carlson - Mid-America Real Estate – Minnesota LLC (moderator)Tricia Pitchford – NorthMarq

Brent Anderson – Stewart Title (moderator)Richard Jahnke – Paster Enterprises

John Johannson – Welsh Companies

Networking Tip #2

Ask yourself what yourgoals are in participatingin networking meetings sothat you will pick groupsthat will help you getwhat you are looking for.Some meetings arebased more on learning,making contacts and/orvolunteering rather thanon strictly making businessconnections.

Source:www.strategiesforchange.com

Small Talk

NetworkingTip

MSCA Connection February 2011msca-online.com 7

We’ve got real estate experience in the bag.

The retail development and investment experts at United Properties are leaders in the market, with an unparalleled depth of experience and industry knowledge. As buyers, builders, consultants and operators, we understand your business.

To learn more, visit www.uproperties.com or call us at 952-835-5300.

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To clarify the scope of the exception for existing tenants,consider limiting the exception to a list of permitted uses of theexisting tenants attached to the lease. A benefit of thisapproach is that the tenant can review the permitted uses andanalyze the potential for competition from existing tenants. Adrawback is that it can be administratively burdensome for thelandlord. Also, since the language of the permitted useattached should be exactly as set forth in the lease of theexisting tenant, definitions can pose challenges that make thepermitted use unclear.

Major Tenant Exception - An exception for major tenantsoccupying more than a certain square footage of space atthat center should also be considered. The definition of“major tenant” depends on the size of the retail center andthe realistic possibility of the size retailer that may lease spaceat the center. Generally, major tenants will not be willing tomodify their operations for a particular retail center and willbe reluctant to consider a center that requires modification.This exception can be especially important for a retail centerthat is evolving and changing its focus.

Small Tenant Exception - For tenants leasing larger areaswho want an exclusive, consider carving out a small tenantexception. This could allow smaller in-line tenants to sellcompeting products that do not pose significantcompetition to the larger tenant.

Specific Tenant Exception - Always carefully analyze bothexisting and potential future permitted uses that may beproblematic with an exclusive. If a potential future permitteduse is contemplated that may conflict with an exclusive,

consider adding a specific exception to the exclusive for thepotential future permitted use. For instance, an exclusive formassage services may need to carve out a potential futurepermitted use of massages by a chiropractor or medicalclinic. Also, if the permitted use of an existing tenant mayconflict with an exclusive, then consider adding a specificexception to the exclusive for the permitted use of theexisting tenant. While adding a specific tenant exceptionmay be duplicative, the specificity should eliminate anypotential conflict or inconsistency between the permitteduse and an exclusive. In addition, pre-approval of apotential future permitted use is often easier to get fromtenants at lease execution than a subsequent leaseamendment.

ConclusionClear exclusives avoid conflict and benefit both landlordsand tenants. Careful drafting and analysis of an exclusive iscritical. Exclusives need to be narrowly tailored and includeappropriate exceptions. Not included in this article becauseof space limitations, but also very important to clearly definein exclusives, are the additional elements of geographicscope, duration and remedies.

To view the entire unabridged version of this article, whichincludes a discussion on geographic scope, duration andremedies and thoughts on avoiding conflicts betweenexclusives and permitted uses with other tenants, pleaseclick here or email the author.

Exclusives - continued from page 2

msca-online.com MSCA Connection February 20118

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Legislative Updateby Sonnie Elliott, Faegre & Benson LLP

The 2011 session began on January 4th. The 2010 election dramatically changed thepolitical landscape at the Capitol. The House and Senate went from strong DFLmajorities to Republican control. The Republicans now have a 72–62 majority (formerly

67–87) in the House and 37–30 majority (formerly 21–46) in the Senate. There are 60 newlegislators out of a total of 201. DFL Governor Mark Dayton replaced Republican TimPawlenty. Dayton is the first DFL governor since Rudy Perpich.

The new legislature faces a $6.2 billion projected deficit for the 2012–13 biennium.Minnesota’s constitution requires a balanced budget. Lawmakers will need to cutapproximately 16% ($1 of every $6) in state spending, increase revenues by that muchthrough taxes and/or fees, or some combination of spending cuts and revenue increases.

These are the specific issues on the 2011 Legislative Agenda for MSCA:

�� Statewide Property Tax. Lawmakers may increase the statewide property tax levy tohelp solve the budget problems.

�� Sales tax expansion. Expansion of the state’s sales tax base has already beendiscussed as a way to increase revenue collections. An expansion could includeclothing, tax preparation, advertising and legal services and other services.

�� Transportation utility fee and other impact fees. Proposals to allow local units ofgovernment to impose fees on property owners could be seen as a way to mitigateother cuts to local governments.

�� Variance fix. A recent Supreme Court decision has meant cities must meet a muchstricter standard in the granting of variances than has been used historically. MSCA willbe working with the League of MN Cities and others to clarify the law.

Top 5 Cities ranked by units builtfrom 2000 - 2010

Total 2000-2010 2010

St. Paul 11,667 20

Woodbury 6,214 517

Blaine 6,152 331

Lakeville 5,815 135

Shakopee 5,783 186

Total for metro area:

73,545 3,128Source: Keystone Report

Stats: Top Cities by Units Built

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