Did any company in SF ever sell out and have to share profits with their landlord?
February 28, 2011 10:36 AM   Subscribe

Back in the year 2000 during the tech boom, business space was in HUGE demand and landlords in San Francisco's SOMA district used to ask for very long leases and even a % ownership stake in your startup. I'm wondering, ten years later, did any property owner rent out their space to a successful startup and end up getting a payday when they flipped?

I remember this vividly from the summer of 2000. Pyra was looking for more office space but office space was rare and it was priced high, and some building owners asked for minimum three year leases and one place even wanted a slice of the companies it housed in its walls.

I always wondered how many people took those restrictive terms? Did any successful startup actually have to share a big payday with their landlord later in the early 2000s?
posted by mathowie to Work & Money (5 answers total) 9 users marked this as a favorite
 
Cvent gave stock to a couple of landlords during the dot-com boom. It struggled for a while but avoided bankruptcy and is now successful ("the world's largest event management software company"). The company is private, and I have no idea if the landlords held on to their shares, but it's at least possible that they profited handsomely from the deal.
posted by jedicus at 11:07 AM on February 28, 2011


3 years is actually a pretty short lease as it relates to office space in a highly desirable area. In Midtown NYC or the financial district the average is probably more like a 5-7 year term. AAA buildings can demand as much as 10 years for the kind of space banks or law firms demand.

I seems like landlords were trying to cash in on the sudden influx in the area. It wouldn't surprise me that the ways they tried included lengthening lease terms commensurate with other desirable locations. I have never heard of demanding equity, but I'm not terribly surprised a landlord would at least ask for it.
posted by 2bucksplus at 11:08 AM on February 28, 2011


Just to clarify, I remember when discussing office space in San Francisco, the go-go nature of internet businesses made 1-year leases the norm, but when space started to get in high demand, the traditional 1-yr went up to 3-year minimums.

A hell of a lot of firms went under in the area during this time so I suspect many, many bankrupted companies defaulted on those long leases, but I am curious if any "hits" survived through that period and place and actually paid off for the landlords (at the time when I heard someone wanted a percentage of the company for office space I thought it was insane, still do actually).
posted by mathowie at 11:12 AM on February 28, 2011


Maybe Palo Alto's Medallion Rug shop Medallion Rug shop
posted by bottlebrushtree at 2:38 PM on February 28, 2011


I was hoping you'd get some direct answers, but I see you haven't. Short of stumbling into the right newspaper article, the way to research this would be to look at records of insider stock trades. I think, but am not positive, that some would turn up.

I know the landlords-asking-for-stock thing was common back in that crazy time, but I also know every entrepreneur did their best to resist it. My guess is in the end not many companies gave up a slice of equity, particularly successful ones.
posted by Nelson at 9:35 AM on March 1, 2011


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