Our anchor tenant, a corporate owned restaurant chain that occupies over 5K SF of space, has contacted us with a request. They're looking to perform some improvements to their location but are looking to us for partial funding. They options they presented to us are as follows:
- Contribute $85K towards 200K remodel; base lease extended 10 years from 8/2014; four 5 Year options and increases.
- Contribute $0 towards remodel; base lease extended 10 years from 8/2014; Rent remains unchanged for next 10 years; four 5 Year options and increases.
This sounds a little questionable to me; and the circumstances are a little questionable. The tenant has 2 years left on their inital lease and have not exercised any of their 5 year options mentioned above. If we go tell them to pound salt, they begin to look to acquire new space now and have the entire build-out process completed by the time our lease is up.
One of our partners is claiming that this is their way of muscling us into funding some of their remodel; and I tend to agree. The belive that they would prefer to not have to fund a $2MM capital expenditure if they can avoid it; but they would also prefer if they didn't have to fund the entire amount of their remodel.
What I'm asking is: has anyone been faced with a similar situation where the anchor tenant has requested contribution to their remodeling expense? Thanks in advance.
Without knowing the whole development and what your exposure is it's hard to give a lot of info.
I can tell you FOR SURE whether a corporate restaurant or not that rents do not stay flat for ten years.
Even if a highly profitable corporate store rents increase at least 1 to 1.5% annually.
If you have flat rents my clients will just buy a pharmacy with much more quality and security.
Is this a ground lease, double net, triple net??
What restaurant name is it??
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