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(818) 519-5040

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#386
Westlake Village, CA 91362

©2016 by ESR Commercial

How does a good deal become a great deal?

August 19, 2016

 

ESR Commercial’s strategy is to know what is going to be thought and said 3 conversations in advance. Even before the first call or email, we’re planning on what we’re going to say the next time we speak, and how the person on the other end is going to take what we say and respond to it. It’s knowing when to push and when to step back - something that only comes with many years of experience.

 

Everyone looking to open a store knows the basic, obvious items that make a deal better – cheaper rents, free rent periods, and tenant improvement money. But only those more experienced in the real estate world know the additional factors that can push the deal over the edge into “great deal” territory. These things can include economic factors like the landlord being responsible for part or the entire A/C unit, little or no personal guaranty, and different allocations of security deposits, among hundreds of other options that go into each lease.

 

In one deal in Lexington, Kentucky, the landlord asked for 6 months of security deposit because the owners didn’t have any experience. Because we had done so much business with that landlord in the past, we knew that he would accept 2 months security deposit, with a third month to be applied to the 13th month’s rent. We know that upfront capital is very important to our clients, especially those who are opening up new stores, and saving 4 month’s worth of rent can go a long way into developing any small business.

In another deal in Orem, Utah, we negotiated a deal where the landlord wanted a full personal guarantee for the full term of the lease, with a month’s security deposit to be held for the duration of the lease. We settled on a partial 18-month personal guarantee, and agreed to give 2 months security with one of those months to be applied to the 13th month’s rent. This was a great deal for our client because we had already negotiated 6 month’s free rent with a full build out at the beginning of the lease. We were extremely confident that the tenant would be in the same location at the end of the first year, essentially making that 2nd month of security deposit prepaid rent. This lowered the client’s cash out of hand during the term of the lease, while simultaneously reducing a great amount of risk and personal exposure.

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