Operating Lease Structure Clause Samples
The Operating Lease Structure clause defines the arrangement under which an asset is leased to a lessee for a specified period without transferring ownership rights. In practice, the lessor retains the risks and rewards of ownership, while the lessee pays periodic rental payments for the use of the asset, such as equipment or property. This structure is commonly used to provide flexibility to the lessee, avoid asset ownership liabilities, and keep the leased asset off the lessee’s balance sheet, thereby simplifying accounting and risk allocation.
Operating Lease Structure. (a) Without limiting any of the other provisions of this Article VII, from and after the Closing Date, PRISA III REIT and Ashford Hospitality Trust, each of which the parties hereto acknowledge is a real estate investment trust (“REIT”) as of the date hereof, shall have the right to elect not to be treated as a REIT. In connection with any such election, Borrower permit Property Owners to remove some or all of the Individual Properties from the REIT ownership structure (such removal is a “De-REIT Conversion”) in place on the date hereof (it being agreed and acknowledged by the parties hereto that certain of the Individual Properties are held in a REIT ownership structure on the date hereof) and terminate the applicable Operating Leases, provided that the other provisions of this Article VII are not breached thereby, and the following additional conditions are satisfied:
(i) The De-REIT Conversion is not, in the reasonable determination of Lender, likely to impair or otherwise materially and adversely affect (A) any Property Owner’s financial condition, (B) the operations at any Individual Property or (C) Borrower’s ability to pay the monthly Debt Service or the payment due on the Maturity Date or otherwise perform its obligations hereunder and the other Loan Documents;
(ii) The De-REIT Conversions does not, in the reasonable opinion of Lender, impair or otherwise adversely affect the Liens, security interests and other rights of Lender under the Loan Documents;
(iii) At the time of such De-REIT Conversion, there is no continuing Event of Default;
(iv) Borrower delivers evidence to Lender that such De-REIT Conversion has been approved by each Manager, Franchisor and Ground Lessor, or if such approval is not required by any such Manager, Franchisor or Ground Lessor, Borrower has delivered evidence thereof to Lender, such evidence to be reasonably acceptable to Lender;
(v) Borrower shall reimburse Lender for any actual costs and expenses it reasonably incurs arising from the De-REIT Conversion contemplated by this Section 7.6 (including reasonable attorneys’ fees and expenses); and
(vi) Lender shall have received confirmation in writing from the Rating Agencies that rate the Securities that the De-REIT Conversion will not result in a qualification, downgrade or withdrawal of any rating initially assigned or to be assigned to the Securities.
(b) At Property Owners’ option upon receipt of the prior written consent of Lender (such consent not to be unreasonably ...