Commercial Deal Under Contract--COVID-19 reason to renegotiate?
I'd love to get thoughts on whether this situation warrants a renegotiation of my current deal.
2 Years ago I put a commercial building under contract for $720,000. It is a 2 unit building of retail type space.
Here were the terms:
$0 Earnest Money
We were able to put one of our businesses(A Salon, which is shut down by COVID for at least 45 days) in one of the units at a very good rent which was staggered from 6 months free, 6 months of $1,000 per month, 12 months of $2,000 per month, and then the remaining months $3,000 per month. At closing we will get 80% of the rent we paid back as a down payment at purchase ($38,000)
We plan to purchase with an SBA 504 loan, so at closing we will move another one of our businesses into the other side which is currently rented out but lease will end. SBA 504 requires 51% occupancy and very great terms such as only 10% down.
We also have a property adjacent to it under contract we will use to add an additional parking lot. The purchase for that property was estimated to be $80,000 by the person selling me the building but turned out the best I could get was $150,000 with the actual seller. This expansion is crucial to have adequate parking.
All in all with remodel the deal will be 1.2 million so $120,000 down.
In our State, both of the businesses we own which are planned to occupy the building are being shut down and its costing us a TON of money. $40,000 in lost revenue for April. It's devastating and it will effect our ability to get the $120,000 down.
Being that I put this under contract when the economy was great, and now its quite obvious that commercial real estate values will be plummeting, is it reasonable to renegotiate this deal?
My thought would be asking seller to increase kickback at closing from $38,000 to somewhere in the realm of $60,000-80,000.
Worst case to close I can refinance other paid of assets from the business, but it's not a preferable option, plus I don't want to pay 2 years ago market price, when that's likely no longer the value when we close on it 5 months from now.