Adam Leitman Bailey, P.C. negotiated a twenty-year Lease on the Owner’s behalf with national company Energy Tenant, which finances and manages all aspects of energy storage development and operations to significantly and sustainably lower electricity bills for the commercial and industrial sector, electric cooperatives, and municipal utilities. This company also serves as a capital partner and resource for solar and storage developers.
Negotiation of this Lease entailed several tricky issues. The property involved was vacant land and had a trucking Tenant, on a two-year Lease, which parked its vehicles there. However, to determine feasibility of the project on this property, the energy tenant needed two years of due diligence, including invasive testing, all the while that the trucking tenant was using the property. As a result, Adam Leitman Bailey, P.C. had to delicately negotiate a very specific consent which permitted due diligence to proceed.
Security was also a critical factor for the client. The client was concerned that a Lease default could result in significant energy storage equipment which would be both very expensive and environmentally sensitive to dispose of. Accordingly, Adam Leitman Bailey, P.C. negotiated a letter of credit security deposit of many millions, which did not burn down throughout the twenty-year term. Moreover, Adam Leitman Bailey, P.C. required the letter of credit to remain in place until all the Tenant’s property was removed and negotiated a strict time limit for such removal, failing which the letter of credit could be accessed by our client as compensation for removal which was not timely.
The energy Tenant was not prepared to risk a twenty-year commitment and required a termination right. In an unusual provision, Adam Leitman Bailey, P.C. required this tenant to agree that, in the event of such termination, it would forfeit the entire multi-million-dollar security deposit.
The energy Tenant required the client to indemnify it for pre-existing environmental hazardous substances on the property. The client asked us to minimize its exposure under this provision and so Adam Leitman Bailey, P.C. required the energy Tenant to conduct a Phase I, and if so indicated, a Phase II, during the due diligence period and stipulated that indemnification would not apply to any condition discovered, or which should reasonably have been discovered, during the due diligence period.
With several tricky issues, the Lease took some time to be finalized. However, due diligence was proceeding, and the client was getting paid while these negotiations continued. Our client was pleased that it had the benefit of numerous protections as well as a very valuable Lease.