Placing Tenants in commercial buildings

I have taught many times the concept of finding an empty retail single-tenant building (which should not be hard to find these days) and getting a tenant for it by calling around until you locate the right tenant.

Many students gave me excuses such as: “The landlord does not want to cooperate”. “I can’t get access to the property”. “The Tenant wanted information I did not have”. “I did not know how to get a letter of intent filled out (LOI)” or my favorites: “I got the tenant lined up but the landlord does not want to pay me a commission because I am a licensed realtor” etc.

I can truly say I heard it all.

So I decided to create a challenge for my student graduates of the Cancun event. I will pledge one of my buildings located on Cristo Street. The address is 205 Cristo st Old San Juan, PR 00901.

This is historic building is in a great location. The cruise ships dock a few blocks away and thousands of passengers walk the streets of Old San Juan almost every day to shop while on their cruise. There are also hotel tourists and local shoppers that visit the area quite frequently.

The street where the property is located is a unique outlet street for some of the biggest retailers in the US. Next door there is Polo Ralph Lauren, across the street there is Coach bags, and Tommy Hilfiger, a few doors down Burberry and Guess as well as Crocs.

Here are the basic steps you must know to get a Tenant to sign a letter of intent:

• 1. The address and pictures of the building inside and out along with some neighboring Tenants
• 2. The square footage, height, and frontage of the property
• 3. The approximate yearly sales of the neighboring Tenants
• 4. How to go on www.CMREI.com website to access the Tenant list
• 5. What to tell them on the phone
• 6. How to fill out an LOI to send to the interested Tenants
• 7. How to negotiate the various points and issues to get ready for the lease

I created a video to show the rental space to those who have not been to Old San Juan. I will give the Cancun graduates the “as-built” (meaning the drawings of the space) and the challenge will be for 90 days. Whoever gets me an LOI by a national tenant that can give a corporate guarantee and lease for 5 or 10 years will get a 2.5% referral fee.

Space should rent for $20,000 a month so a 10 years lease with a 3% yearly increase would work like this on a yearly basis:

$240,000

$247,200

$254,616

$262,254

$270,122

$278,225

$286,572

$295,169

$304,024

$313,145

Total lease value $2,751,327

The referral fee at 2.5% would be $68,783 to the first graduate that gets me a Tenant for that space. The referral fee shall be adjusted based on the amount and number of years the Tenant will sign.

Once you practice getting a real tenant into real commercial space the sky is the limit. You could repeat the process and benefit by doing the following once you get the Tenant lined up:

• 1. Get a referral fee from the landlord/owner of the property
• 2. Lease the property for less than you can sublease to the national tenant for and keep the difference for the 5 or 10 years.
• 3. You can put the building under contract and then assign the contract
• 4. You can put the building under contract and then buy it
• 5. You can partner up with the Seller
• 6. You can raise money (syndication)
• 7. You can lease the building with an option to buy, then exercise the option

You are only limited by your knowledge, creativity, and communication ability.