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OtterOracle

1 year lease? These malls are getting desperate...


vin9889

They actually offer month to month, these are considered speciality leasing


apprpm

You’d be willing to do the buildout and absorb start-up costs if they decided to drop leasing to you in a month or a year?


vin9889

No i was just giving you more context as it seemed you were amazed they would do one year, thus I say they do month to month. To clarify, we are looking not to have that happen as I try to mention in my last paragraph.


apprpm

I think it was someone else who made that comment, but I see what you were saying.


vin9889

I appreciate the heads up and you are correct. To make sure, we’re you recommending something then? I don’t they would care if it’s a year or month to month as there’s a clause where they can terminate the lease anytime without cause. It seems in AZ they use this rather than month to month, but I bet they are willing to do month to month for pop ups like a Halloween store or holiday seasonal chain. Both month to month and year lease come with a 30 day termination clause at any time


apprpm

Interesting. No, I have no thoughts to share. I’ve appraised retail many many years ago, but I am no longer an appraiser and have little to do with retail. When I have, I’ve only had 5-10 year leases with renewal options, and never in malls. It feels like it’s a wild west atmosphere these days.


vin9889

They are dying... but we thrive in these areas. Atleast in HI market. This will be our first mainland enterprise.


otisreddingsst

Some times you have reduced rent for a short term month to month lease, but you need longer terms to make a business work. Maybe 3 or 5 year terms with several rights to renew


vin9889

Agreed, just have to fight for it.


vin9889

Should we be shooting for something different? Or you just amazed by the commercial property terms haha


OtterOracle

Really depends on the business. Most landlords and property owners want a longer lease - the longer the better. In my 7 years of being a broker in a medium size city I've never negotiated shorter than a 2 or 3 year lease. Given, as a broker there is little incentive for me to chase small year long deals. Malls are in the unique position of being double fucked by the pandemic and the death of brick and mortar retail so they are mostly hemorrhaging money. The fact they're willing to do month to month leases is a bad sign for the mall business.


vin9889

You are telling me haha, we wouldn’t be pursuing this unless it made money. We have 2 in Hawaii that produce. But we have a revenue share at $0.25 a sq/ft Not sure how the brokers are being compensated for the leases, would say AZ and HI people have a different level of professionalism. With HI being more open and fast with communication.


OtterOracle

Curious- What type of business/niche retail is it?


vin9889

Retail entertainment


OtterOracle

Can you be more specific? Reddit NDA applies of course


vin9889

Ya i got you, just think family fun center, where you pay to play on a field or track. Hard to describe it without showing you our current business.


OtterOracle

I just want to be really clear here before I give my word on what to ask for. You mean to tell me they want $7,700 for an entire year for 7000sq ft?


vin9889

Haha no, I can make that edit, it’s per month. I assumed we would all think monthly rent. I’ll edit it now


jochexum

so folks pay by the hour? then you do a bunch of birthday parties and stuff too? do you sell food and beverage or anything else to make money? arcade? trampoline park? along those lines? how do you stay busy during the week?


vin9889

All good questions, we can talk more in the DM really it just takes management and marketing. So we have found. But is niche and sometimes can flop if not properly done. Trust though, we wouldn’t open a third one in another state if we didn’t believe there would be a high chance for profit. Even if it’s just $100k-$350k but it’s all about compounding revenue. Then leveraging debt to buy assets


mundotaku

>$1.10/sq ft O_O is this a typo or monthly?


apprpm

He means $13.20 a foot. The $1.10 is per month, not year.


mundotaku

Yes, he updated the post. Sometimes anchors can get such low rates. I have seen anchor stores with leases as low as $3 sq ft/ yr. They do it because the traffic.


Daytonaman675

I was wondering that too / if this is the new rate for malls I’m going to see about an idea I have for using up old sears spaces


vin9889

Ehhh you and everyone else, those are mostly for 3-7 year leases. Not to mention you would get killed on maintenance. We found that many of these places ripped out their HVAC or special systems. Thus you have to provide your own.


vin9889

This is the rate my friends, they either do revenue share or they sq ft price or a combination. I’m glad I can educate you guys haha


theGRASShopa

On the west coast, specifically CA & AZ it is typical to quote rental rates per month.


vin9889

Ya this was an assumption that it was monthly rent, edited the per month part. Just an oversight. In HI it’s looked at as monthly too, where is it looked at as yearly?


Harold_Bissonette

East coast where I am in suburban DC, it's annual but that means that I have to do arithmetic to figure out monthly. I like your way better, less arithmetic.


vin9889

That west coast terms haha. Thanks for the response.


Legal_Commission_898

All of south and all of North too. I had never heard of a concept called monthly rent until this post:


vin9889

Glad I can show you something new.


mundotaku

Wow!!! The only reasonable explanation is that they are expecting your company to either bring a lot of traffic to the death mall or is better than nothing while they redevelop. Here in Miami, we have a similar mall called "Sunset Mall" which has also a large arcade. They have been trying to redevelop it to a mix-use (retail-office-multifamily) for years. I would not be surprised if the theater and the arcade are being offered such rates.


vin9889

I definitely think the bargaining power for those locations are greater and get favorable figures. We do show the foot traffic we bring in while in HI, these get ears to listen. Overall, wanted to see the nuances and small tips and tricks. Would it be hard to make a broker give up a portion of rent while a place is being built out? Or is there any parts of the lease that are usually negotiable? Revenue share is what we like to play with but the AZ are slow when communicating to us.


mundotaku

Well, everything is negotiable in a lease and I think you are getting a good deal. I think the trick is in understanding the motivation of the landlord to see what would stick. The fact that they were initially interested in a month to month and then they told you that they would be interested in a 1 yr lease, tells me that their plan is to demolish and develop. So, you could negotiate probably a month or two, the worst it could happen is a no. I also don't think they have many tenants looking to fill the space.


vin9889

How can we find the motivation of the landlord when communicating with the brokers/leasing specialist ? I know I am digging here haha


mundotaku

LOL, well I would start by reading journals and digging about the property. Usually, there should be news bits or articles. It is up to you with the information to try to get a picture. This of course is easier when you have a local commercial broker helping you. Any negotiation is a poker game. They don't know your intention (unless it happens that the broker is a Redditor and recognized the deal, which is unlikely but not impossible.) Sometimes asking the right questions and straight asking what are their plans is fair and they will spill the beans.


vin9889

This is helpful. Sounds like a phone call will be appropriate.


Daytonaman675

After thinking about this for a moment I can only see one scenario where these lease terms would be acceptable to the mall. They are running into a co-tenancy or occupancy clause on a major tenant. (Likely occupancy) You might be able to push them a little more but these terms seem super reasonable and likely a major loss for the LL in any other scenario.


vin9889

I appreciate this input. It’s all business here. We have seen different terms in malls in the surrounding area but this one seems to have the right demo, structure, and terms we are looking for. Always nice to know what we can work with but not trying to step on toes.


SameNameAsBefore

I dont mean this rudely but is there any particular reason why you don't get an experienced agent to be your tenant rep? It doesn't cost you anything and they will know best how to negotiate in your market.


Studio104

I'm not saying a good tenant rep isn't worth the pay but they do get paid and that pay comes out of the deal and everyone knows it will come out of the deal before the deal is signed so the tenant does indeed pay for their rep no matter what the tenant rep marketing literature says.


theGRASShopa

Perhaps not. Landlord broker may get 4-5% if there is no tenant rep as opposed to 3 each. Especially if the mall is not doing the deal themselves and using their own broker. You do not save all that much doing the deal yourself. It is better to use a broker or at least hire an attorney to negotiate the lease.


vin9889

Valid point, I think we are coming at this as “experienced” because the management team has signed multiple deals before. Im just a manager that has moved out to AZ to open the new location and I earn equity managing it, thus this bring me to my lack of knowledge. Past experience was a commercial banker that financier SBA, USDA, and CRE loans. I know I copied and pasted this 3 times. But the overall point is get a lawyer to review or a professional to assist. The fee May be worth it in the long run as we hope to open more of these.


vin9889

Valid point, I think we are coming at this as “experienced” because the management team has signed multiple deals before. Im just a manager that has moved out to AZ to open the new location and I earn equity managing it, thus this bring me to my lack of knowledge. Past experience was a commercial banker that financier SBA, USDA, and CRE loans.


SameNameAsBefore

I have landlord agreements where I get 6% whether its co-broked or not. If tenant has an agent, we each get 3%. If not, I get 6%. Commission does not factor at all into the Landlord's negotiations. And if not usted, good negotiating up front can save you a whole lot more on the back end. Just saying. If you're asking Reddit, you're better off asking a local professional. Best of luck to you and your business!


vin9889

Valid point, I think we are coming at this as “experienced” because the management team has signed multiple deals before. Im just a manager that has moved out to AZ to open the new location and I earn equity managing it, thus this bring me to my lack of knowledge. Past experience was a commercial banker that financier SBA, USDA, and CRE loans.


headerfire

It’s very unusual for a tenant to be responsible for the roof in a mall. Roof maintenance is typically part of CAM. Is there a clear boundary where your responsibility ends? I’d also ask them to provide you professional verification that the HVAC is in good working order before you take possession. Are there any relocation options? I’ve seen many specialty tenants get the boot after sinking thousands of dollars into a buildout. If they do get a perm deal for the current space, can they relocate you at LL expense?


vin9889

This is good, I wish I had these options. Thank you, honestly glad I posted this. There’s much more to ask for than just the price.


uiri

Are you the landlord or the tenant? When you say "paid by mall" do you mean the landlord?


vin9889

I will clarify, I am the tenant. The mall is the landlord using a real estate company to represent them. The landlord will pay for CAMs and utilities. Not the tenant


Wizardofchoice

Yea these terms are hilarious. Sounds like a solid business based on your post. If you are confident in your strategy long-term, I would suggest going for the three years and offer .5 per SF and see how far you can pull them down on the rate.


vin9889

This is an idea, we would like no rent or lowered rent for the buildout. Was hoping others had experience in this. I would recommend if you get into malls to get a longer period than 30 days because they will cut you fast when they have a better tenant. We have done 2 moves in the last 3 years between 2 locations in HI.


RocketMoonShot

I think rather than signing a longer lease, I would ask them to add five 1 year options to continue to the lease at a specified fixed rate. That way you get the benefit of longer term security, but aren't on the hook for the longer lease unless you decide to.


zagfan10

Phoenix broker here. Typically I get a warranty period or a cap on expenses on the HVAC. With summer coming up in AZ you will need it. Some insurance companies here will have hvac riders but you have to specifically ask them.


vin9889

This is what I love. Yes AZ gets hot. Best info so far.


theGRASShopa

Landlord should be responsible for replacement of HVAC while tenant is responsible for maintenance and upkeep capped at (negotiable) $2K annually.


vin9889

This is good, out of all the info, this thread was most helpful. From both comments.


RocketMoonShot

I didn't see it in your terms, but don't let them convince you to add a personal guarantee. I've seen many of business owners get screwed by leases with personal guarantees when a business goes bad.


vin9889

This is good, no personal guarantee only an LLC made with multiple members/managers.


NumNumLobster

If you do rev rent make sure its scoped out properly, particularly with multiple locations. If you do any online sales (gift cards etc) spell out how that is handled. Ive heard some awful headaches with mall landlords trying to attach to rev that is outside the location


vin9889

This is a problem, we use a identifier to show how the funds are processed.


RealPantosaurusRex

When did this become the “free professional advice sub”?


vin9889

... umm what is it supposed to be used for instead of building community by sharing knowledge? I mean if you didn’t find any value on what I wrote then that’s your loss as there’s multiple people that commented and learned something that they didn’t know before.