KeyBank wins cash sweep fight over tenant’s early exit clause
One of the building’s tenants, Greenspun Media Group, occupied about 25,000 square feet and was classified a “Primary Tenant” under the loan agreement. That designation came with a tripwire: if Greenspun failed to renew its lease within nine months of its June 30, 2023 expiration, the lender could initiate a cash sweep – meaning the property owner would have to funnel all revenue above operating expenses into a lender-controlled account.
Greenspun had not signed a lease extension by October 1, 2022. The lender pulled the trigger.
Two months later, the property owner came back with what it believed was the cure – an extended Greenspun lease for five years. But the lease gave Greenspun the option to reduce its space or walk away entirely, exercisable on the first day of the 13th month after execution. If exercised at the earliest date, Greenspun could be out by the end of month 13.
That exit clause proved fatal. The loan agreement required the primary tenant to renew “on terms reasonably satisfactory to Lender (but not for a term of less than five (5) years or for rent below the then market rental rate).” The court found this language unambiguous. The five-year minimum was a standalone requirement, not something the lender could waive under the broader “reasonably satisfactory” standard.
Because the extended lease did not “unequivocally bind” Greenspun for a full five-year term, the cure failed. The lender kept the sweep running.
