Tech firm restructures lease to protect against rising rents.

Is there any value in analyzing a commercial office lease, in the middle of its term, with as much as four years remaining on it?

Absolutely, according to Marc Shapses, senior managing director, of international real estate services firm Studley, who, together with Jason Schwartzenberg, assistant director, just advised a Midtown tenant on how to restructure its lease early to protect against escalating rents in the future.

With four years remaining on its 35,000 s/f lease to occupy the entire fifth floor at 417 Fifth Avenue, technology firm Shen Milsom & Wilke retained Studley to analyze various options. The result made the exercise all worthwhile.

"By restructuring the lease early and extending the term to 15 years, we were not only able to secure Shen Milsom & Wilke's future in space that worked very well for the company, but we were also able to arrange for the landlord to provide a work allowance to invest in its space." According to Shapses, "With an overall New York City availability rate of 8.2% at the end of the third quarter of 2006, and an even lower Class A availability rate of 7.0%, office space is becoming hard to come by in Manhattan, not to mention that the lack of supply is forcing prices up. So if staying put is a viable option, it makes absolute sense for tenants to consider an early renewal/restructuring, as it could prove to be extremely economically beneficial for the long-term."

Roxana Q. Girand, director of Real Estate for Murray Hill Properties, the landlord of 417 Fifth Avenue, negotiated on the landlord's behalf.

Shen Milsom & Wilke was represented by Yao (Helen) Fu Esq. of Menaker & Herrmann LLP, while Barry Langman Esq. at Paul, Weiss, Rifkind, Wharton & Garrison LLP acted for Murray Hill.