Short lease terms for retail and industrial

[Sam B.]

Hi guys. I’ve come across a deal which I like, that has good upside. The only issue is that the most of the tenants have short lease terms, <5yrs. How do you go about a deal like this? I am guessing the bank will have a problem with the deal the way it is. Do you just go under contract and then in diligence work towards extending some of the leases?

[Greg Dickerson]

Originally posted by @Sam B.:

Hi guys. I’ve come across a deal which I like, that has good upside. The only issue is that the most of the tenants have short lease terms, <5yrs. How do you go about a deal like this? I am guessing the bank will have a problem with the deal the way it is. Do you just go under contract and then in diligence work towards extending some of the leases?

You cannot negotiate lease terms with tenants until you own the property. You could ask the seller if they would be willing get the extensions as part of the contingency.

Bank financing will depend on the property, the tenant mix and your financials. You will need to run the deal by several banks as they are all different.