How can I convert a commercial lease into a lease purchase?
September 5, 2006 10:38 AM Subscribe
I'm currently leasing my business space from an unmotivated landlord who seems to care less about what goes on within his buildings. I would've bought the building back when we moved in, but neither my budget nor my D&B credit score were what they are today. How can I structure a lease purchase option that will give my landlord enough incentive to part with his building, but at the same time won't overly burden us with new lease obligations?
Here's a quick history of our building situation:
- When we originally moved in, it was owned by a different landlord - one who was very interested in our business, made frequent visits to make sure everything was okay, and expressed intent to eventually sell the building to us when our finances recovered from our "start-up process."
- One month before we open, we find out that our original landlord had sold all of his buildings (7 total) in one fell swoop. He expressed his apologies and told me that the offer was just too good to refuse. I didn't blame him (I would've done the same thing), and we're still on very good terms.
- The new landlord, however, has been completely absent from his properties. All of the tenants, and our old landlord, get the sense that he only bought the buildings so he could say he's a property owner in this trendy part of town. Even still, he doesn't advertise any of the vacancies in his newly acquired buildings, which completely blows my mind. Why buy the buildings if you aren't going to try to rent them out?! He definitely doesn't need the money (he comes from a very wealthy family), and I kind of get the feeling that he's grown tired of this whole "property owner" phase.
- Finally, we never signed a new lease when the properties were transferred from owner to owner. The only lease I signed was with the original landlord, and after titles were exchanged, the new landlord called me to ask if I would fax him a copy of our lease, as he had never received one (WTF!).
So, what steps should I take to wrest our building from him? I know that when landlord #1 purchased the building in 2001, he paid $120K for it. The area is in a bit of a real estate boom right now, so I wouldn't be surprised if it appraised for at least twice as much today. I was thinking we'd approach our new landlord with a purchase option of 3 years, 5% down, and keep our current monthly payments of $2,200 per month. I'll try to sweeten the pot by agreeing to maintain the property, which is something I already do.
Any suggestions, tips, advice would be greatly appreciated.
Here's a quick history of our building situation:
- When we originally moved in, it was owned by a different landlord - one who was very interested in our business, made frequent visits to make sure everything was okay, and expressed intent to eventually sell the building to us when our finances recovered from our "start-up process."
- One month before we open, we find out that our original landlord had sold all of his buildings (7 total) in one fell swoop. He expressed his apologies and told me that the offer was just too good to refuse. I didn't blame him (I would've done the same thing), and we're still on very good terms.
- The new landlord, however, has been completely absent from his properties. All of the tenants, and our old landlord, get the sense that he only bought the buildings so he could say he's a property owner in this trendy part of town. Even still, he doesn't advertise any of the vacancies in his newly acquired buildings, which completely blows my mind. Why buy the buildings if you aren't going to try to rent them out?! He definitely doesn't need the money (he comes from a very wealthy family), and I kind of get the feeling that he's grown tired of this whole "property owner" phase.
- Finally, we never signed a new lease when the properties were transferred from owner to owner. The only lease I signed was with the original landlord, and after titles were exchanged, the new landlord called me to ask if I would fax him a copy of our lease, as he had never received one (WTF!).
So, what steps should I take to wrest our building from him? I know that when landlord #1 purchased the building in 2001, he paid $120K for it. The area is in a bit of a real estate boom right now, so I wouldn't be surprised if it appraised for at least twice as much today. I was thinking we'd approach our new landlord with a purchase option of 3 years, 5% down, and keep our current monthly payments of $2,200 per month. I'll try to sweeten the pot by agreeing to maintain the property, which is something I already do.
Any suggestions, tips, advice would be greatly appreciated.
I'm not sure how helpful this is, but if I were in your position, I would want to work with a commercial real estate broker. I'm sure this would add an extra level of expense (6%?) to the process, but it would no doubt be extremely useful to have someone to work with who already knows the answers to all of the questions you have outlined here in your post.
posted by dersins at 5:20 PM on September 5, 2006
posted by dersins at 5:20 PM on September 5, 2006
This thread is closed to new comments.
posted by c:\awesome at 3:49 PM on September 5, 2006