All Forum Posts by: Jameson Sullivan

Sure, it's possible. You will probably find that a LL of commercial property has a better handle on the value than some random who inherited their moms property after her death so your discounts aren't going to be as steep. Any decent retail asset in my market has brokers associated with it already and so you should not expect to be able to list the thing online after you tie it up. Unless you have an end buyer in mind when you go to tie it up, you're wasting everyones times and further ruining the reputation of wholesalers 

I think you think your tenant is looking a lot deeper into their landlord then they really are. If they truly are a national tenant, they aren't researching you and finding out where you live an asking for a $2 reduction because they think you're weak.

It seems you've gotten a lot of similar feedback here but just don't want to move in that direction. That's totally fine if it's the decision you want to make, but the fact of the matter is that you bought a retail asset and there are costs associated with that which include commissions to brokers and TIA. If you really don't want to pay a broker or you think you will break even by hiring one, then just sign them at $17.20 and go back to enjoying yourself!

Yeah you're just on a standard net lease. That's what you will get anywhere you go. Usually my Landlords would much prefer to pay out a TIA and keep the rents high, as this keeps the building value up. That said you are an existing tenant that is a one off company (No offense) so you really have no leverage over him. I don't know donuts specifically but you should be OK doing $1m or more as a one off operator with your current rent structure, are you hitting those numbers?

Tenants say this all the time. "My rent is too high and I'm not earning equity."  This is false. YOU are building equity in your business. If you like your space, which it sounds like you do, don't worry about what the LL is doing. Go sell a ton of donuts and build the brand.

First, I will say, you should not be hesitant to involve a broker and pay a fee. It will be much more expensive for you if you try to negotiate with a national tenant on your own without understanding the local market. They will walk over you...

Retail rents are a lot tougher to track then, say, residential rents. Generally with residential rents, what you see is what you get. There's too many variables in a retail rent to look at a data print out of base rents ONLY and be able to tell what "market" is. 

Where is the building located and who is the tenant? How big is the building? If you can get more granular with the information, maybe we can help a little more. 

As a SUPER basic example, lets say the building is 5,000 ft. 

Current rents: $19.28, NNN ($96,400/yr)

Requested rent: $17.20, NNN ($86,000/yr)

Income Difference: $10,400/yr or $104,000 lease life value.(Assuming flat rent for the ten years as you described)

Value difference @ 6%CAP : $173,333.33

Scenario 1: You give the Tenant the reduction and lose 10k per year in potential rents which equates to $173,333.33 in sale value if you were to sell. This deal costs you zero dollars out of pocket and you continue with the great Tenant.

Scenario 2: You decline to give them the rent reduction and they sign a long term lease at your asking rent. This is the best case scenario.

Scenario 3: You decline to give the reduction and they leave. You relet the space using a broker (which you need for this) at $20/foot, NNN. Here are some costs you may incur:

1. Vacancy $7,166.67/month

Commission : $44,000 ( Assumes a 10 year deal, no rental increases, commission is 6% years 1-5 and 3% years 6-10)

Tenant Improvement Allowance: $15 - $20 PSF or $75,000 to $100,000.

"Total Cost" of deal excluding vacancy: up to  $144,000.

Net Value on sale from doing the new deal(Value added - cost): $29,333.33

Total additional rent from doing the new deal(Total Potential Rents - Total requested Rents X 5,000ft X 10 years): $140,000 over the life of lease. 

Net revenue of Lease life if you do not sell(Total revenue - Cost): -$4,000.

This example is extremely basic and assumes a TON as I don't have sufficient information. You can start to see though that there is no right answer. Your situation/desire for the future is going to weigh heavily into what you need to do.

By the way, what I think you definitely should NOT do is agree to flat rent for the next decade no matter where you land with them for next years rent. 

Rents are not necessarily a science and no broker can guarantee you what rent is. There's a lot of factors that go into the base rent. There could have been a huge TI contribution prior to yo purchasing the property that bought the rent up 15 year ago... I would tell you in this case to look at your personal situation. What's your goal? Are you looking to sell the property or hold on to it for another 10 years? Is the Tenant a good Tenant that you want to retain? If you were to achieve $19 or $20 with another tenant, how much would that deal cost you in TI and commission and what would your effective rent be after all costs associated? Generally, though, I would like to see a 7.5% or 10% bump in rents every 5 years. Where is the property? Is it a desirable asset or will it sit vacant for 9 months or a year while you try to relet it?

There are so many variables here, most of which relate to you as the owner and the market itself. What else can you tell us about the market where the property is located?

just sent you a PM

Any reason you have to buy car washes? There are certainly other STNL assets you can buy with similar lease fundamentals where the buildings are able to be repurposed should the tenant not complete their term.

7 Eleven is on a tear opening up a ton of locations here in WA and they definitely aren't going into locations to appease developers who "need to get SOMETHING there."

Hang tight if you can, you'll be fine.

@Michael Haas Yeah I think it's just up off of Tacoma Mall Blvd and 50th. Been sitting for a while. I thought I remember the zoning not being favorable for MF. @Mark Chieda did you confirm zoning?