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Jim Walston
Jim Walston

Q&A: Landlords ‘doing what they can to keep the lights on’

During his 35 years as a Twin Cities-based real estate attorney, Jim Walston has served a wide range of clients on everything from commercial real estate purchases to public transportation projects.

Walston, a partner with the Ballard Spahr law firm in Minneapolis, has stayed busy of late representing his clients’ interests as states and cities renew restrictions to slow the spread of COVID-19.

In the following interview, Walston talks about how commercial landlords and tenants are dealing with challenges related to the pandemic, civil unrest and more. The interview has been edited for length and clarity.

Q: I wonder if you could just introduce yourself and talk a little bit about your practice.

A: I’m with the Ballard Spahr law firm in Minneapolis in the IDS Center and I have been practicing law now for 35 years. I am the Minneapolis coordinator of our real estate department.

As per my practice, I do a lot of real estate lending work. I do a lot of commercial landlord tenant work. I handle a number of land use matters, development matters. And from time to time, I get involved in some public transportation projects either for public entities or for private parties. So I have a wide array of clients, which is the way I like to do things.

There has been a lot of construction lending over the past three or four months, which kind of surprised me. There’s a good number of sale leaseback transactions going on, where a company has multiple sites and has determined for one reason or another to partner up with a real estate investment company and sell the real estate holdings and lease back.

With the COVID impact, there has been a real downturn in retail. I’m seeing landlords and tenants working with their lender to try to figure out what’s going to happen on that. It’s not like it was back 10 or 12 years ago, where there was a lot of receivership and foreclosure.

Q: So you get a sense that landlords are working with their tenants on maybe restructuring leases and things like that?

A: Yes. Landlords want to keep those retail centers viable. Because once things start going dark, and these premises are vacated or are not used by a tenant, it starts to look bad for the whole retail center. You don’t get that mix of customers or traffic going to multiple places in retail centers. So, you know, landlords are trying what they can to do to keep the lights on. Now, there’s a limit to a lot of that. But I think generally, landlords and tenants are working together in that regard.

Q: You work with both landlords and tenants, correct?

A: Yeah, I would say it’s a pretty even mix. And, of course, if you’re representing a lender you certainly have a direct interest in leases and the viability of leases, and how that fits into a loan. All that jazz between landlord and tenant, I would say, is pretty evenly balanced.

One of the hot topics right now is how do we handle COVID. I think there are more tenants pushing to have that pandemic-related clause in a force majeure. They can’t do something because they don’t have the staff this, that or the other times. Certainly if there’s a government order, that would clearly fall within force majeure. That prevents someone from being open.

Q: What are the impacts of the recent civil unrest in Minneapolis? How has that affected your work and your clients’ interests?

A: OK, you have a multitenant building and we have COVID going on and we have less foot traffic and everything else. We want to barricade off common areas or we want to board up this, that and the other thing. Can we do that? What’s going to happen to insurance? Who’s responsible to replace this [property] that has been vandalized? Does a landlord have the obligation to remove graffiti? It really comes back to what’s in the lease.

Q: Have you worked with any clients, building owners or tenants, who have suffered property damage because of the civil unrest? Or is that just an insurance issue?

A: Most of the people that I work with or come in contact with, they’re more adept at that face-to-face meeting with their insurance people than getting me involved. If there is some dispute as to coverage, that does come up — coverage questions or duty to ensure questions. And we have our experts here that, you know, I know well enough to contact them [laughs].

Q: How did you end up focusing on real estate law? Is that just something you’ve had an interest in for a long time? Did you work in that field at one point?

A: A little bit of both. When I was in high school over 40 years ago, I worked for a real estate appraiser and everything was done manually. So I manually inspected buildings, took pictures of buildings, measured them to complete an appraisal report. This was in Portland, Oregon. I also drove routinely to the county seats to get the building assessor’s cards. That’s the only way you could get it back then in 1975 and 1976.

So I learned a lot about that. I’ve always had a great love for geography and maps. But you know, going into law school, the business aspect of law appealed to me more than the litigation. Litigation never really did that much for me.

But then starting practice here in the metro area in the mid-1980s, in the boom of development, I found myself working on development projects, real estate lending. That was probably two thirds of the work I was doing. So I’ve always enjoyed real estate and working with people to get something done.

Q: Looking ahead to 2021, what do you see coming in terms of the real estate and construction markets? What do you sense from talking to your clients?

A: Maybe halfway through 2021, we might see some slight rebound on some of the retail. I’m not really sure where office is going to end up, because many of us have learned that working from home does it and you can do it.

There is a sense that we can move forward on some things that were put on hold. So I think there’s optimism that things are going to change. I think once people start feeling they can get out and around that we’re going to see some sort of rebound.

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