Orange County, CA Master Lease Option MLO Questions

[Strider Wardle]

Im trying to send out a letter of intent for a master lease and option to buy on a commercial property in Orange County, but Im not sure of what are the master lease norms for my area. Is the option fee usually a percentage of the purchase price? How many years of lease is typical? Does the leasee usually pay the taxes on the property or does that stay the seller/leasors responsibility? What else am I missing? Anyone with experience in the OC or greater SoCal area would be nice to hear from.

The property is 1/2 vacant and the vacant units are trying to be rented for 50% over current market rents and 60% over what the month to month retail tenants are paying. Its on a corner across from a starbucks so its a great location, just poorly managed. This is my first dive into commercial retail real estate, but I currently own commercial residential nearby. My original plan was to 1031 exchange into retail/reataurant/strip center type property, but I cant leverage up like I want to with a lender when the new property is 1/2 vacant and the tenants it does have are month to month.

My plan is to offer a MLO for X number of years paying the landlord the current rents, plus a bonus to entice them to deal and a purchase price calculated at a 6% cap rate based on what I think are current market rents at $24/sqft/year. I would let a large lease broker find my tenants and lease it up for me and put some money into renovations and deferred maintenance. Im almost certain I couldnt 1031 exchange into a master lease option, but I can cash out refi for operating capital and then 1031 when the option comes due if it makes sense at that time.

What do you folks think? Any opinions or criticisms are welcomed and appreciated.