All Forum Posts by: David Kim

Hello,

I have a commercial loan, and it's coming up on the 5 year mark, so maturity is happening sometime next year. What are typical options, assuming I'd like to hold on to it for maybe 1-2 more years (but no more) before selling?

I assume the standards are to refinance with another (or the same) lender, possibly to recast, or to just pay it off (through selling or otherwise).

Are there other options I'm missing, since commercial loans are different than regular residential loans? Are some of my above options actually not real options, in the commercial space?

My main concern with refinancing is, I don't want to incur points penalties to minimize interest rates, because I don't plan on keeping it for another 3 years.

Thoughts?

Agreed, I definitely don't want to lose them, but my location is growing, and I also know they wouldn't reach out to me to have them increase their rent when they add more equipment, in a neighborhood I know is growing.

Can you tell me more about that Cap Rate component? How does 36K annually translate to 720K? Is that just based on an inflation of property value if they were to sell, because of the extra income if we assume 20 years of stability at that rate?

And since I've got 3 more years on the current setup (with an additional 20 or so of optional renewals), wouldn't they be locked in for those 3 years anyway? Wouldn't they be reaching out to renegotiate closer to the end, so they don't breach lease and get taken to court?

I was considering reaching out to some consulting experts on the matter, but I don't see how it can be win-win. If they successfully shoo them away, then I'm down by hundreds (or thousands) in consulting fees, which is the equivalent of losing some of that rent money anyway. Unless they can negotiate MORE money, which they couldn't, cause the carrier would just say, "nah we good" :)

... plus some of their websites are SO sketchy. One of them even has a "Hi, I'm Jamie, tee-hee" fake messenger box... I was half expecting it to tell me about local singles haha. I can't trust that kind of unprofessional front that's clearly not geared towards prudent business owners playing the long game.

Hi everyone,

My property has a cell phone tower on its roof, and I just received a letter from the carrier saying they've decommissioned some of their microwaves, and that they want us to reduce rent in light of this usage change.

There's an implied threat of terminating the lease ("<carrier> will similarly consider this site's viability and continue to evaluate alternatives").

Now, I assume they'd have to at least stick around for the next several years until the end of the current arm of our lease, but I do enjoy the stability of having a much longer term lease with them.

So... is this just a bluff, to shake out people who are easy? I'm thinking of calling them on their bluff, and saying we can consider renegotiating at the end of the current arm (in ~3 years), or just completely ignoring their letter, and assuming this is just an empty threat, and that they'll only go after the people who actually reply at all. After all, taking down a tower and building it up elsewhere should cost them far more than a $100 break in monthly rent will net them.

How would you proceed, in light of receiving such a letter?

Many thanks!

Hello, everyone!

I am in the endgame of the closing process of a commercial property, and it's occurring to me that I have no idea what rents should look like for the spaces inside. The current tenants' rates are no help, given that one of them is the owner of the place, and the other is, for all intents and purposes, on a handshake agreement, so the amount is questionable.

Alas, this is't like in the residential world, where you can walk into a comparable building in the neighborhood, as if you were shopping around, and ask about rental rates in their office. Or is it? Are residential vs. commercial rates roughly similar, not counting the triple-net stuff?

I can't exactly ask to speak to a restaurant owner about their rent (or maybe that's how it's done? it doesn't seem right. I'd be annoyed if I owned a restaurant and someone came in to ask how much I pay for rent)

I tried contacting some agencies that help business find rental space, but that didn't lead anywhere (their proposed locations were all very far away from the actual neighborhood in question).

I'd love to hear any advice those more experienced may have on this matter.

Thanks very much!

A big thank you to everyone who replied. After working with our attorney, we'll require a written payoff agreement from the seller's bank in order to proceed, and a good portion of the remainder of the price will be allocated as rent credit, since the seller still has one business operating on the premises, which will stick around for a little while. A good win-win arrangement.

All the best!

Hello,

I'm working on purchasing a commercial property, and I have a concern about the seller's situation.

Suppose Person 'B' (for buyer) is working with 'S' (seller) to purchase a commercial property 'P1'.

They agree on some price, which is higher than the remaining mortgage principal that is owed S' bank for P1.

It turns out, however, that S has other properties (say P2) with the same bank, which haven't been getting payments, and are on the brink of foreclosure.

S is now concerned that after the sale of P1 goes through, the bank will somehow be able to claim the extra, because of what is owed for P2. Is this a legitimate concern? If so, is there a way to avoid this? For example, adding a contingency on the purchase and sale that only the balance for P1 goes to the lender, else the sale doesn't go through?

I don't want to amend the purchase/sale with a lower price and work out the depreciation difference with the seller, because my understanding is that that's technically tax evasion.

Is there a good way around this?

Thanks!