Hello All,
I am curerntly working on my first CIP deal, I have a number of resi investments but looking to move into the Commercial market.
As such it is currently a fairly steep learning curve. At present I have not actually commitied to anything I am doing the DD and have encountered a few questions i was hoping that some of thepeople who have been there done that may be able to help with.
1. The property currently has around 2.5 years left on its present lease. The bank have indicated they will extend a loan for the length of the lease minus 1 year. is this normal for them to fund for the lease term minus 1 year rather than for the whole of the lease term?
2. At what point would a new lease generally be negotiated? would you be looking to sign them up for a new lease with 1 year remaining? Or would you normally be workingout a new lease with around 6 months left of the current lease?
I am approched the selling agent asking if the tenant would be open to signing a new lease and they have said that with 2.5 years left no they are not. So I am just trying to figure out if the bank are just being a pain or if this situation is fairly normal and a new lease would normally be signed around the 1 year mark anyway.
Oh and the tenant is a long standing well established business in the area that I am confident would resign a lease when it was due but I am worried if I will have an issue with the timing of when the loan may need to be renewed verse when the tenant may resign a lease.
Thank you for your help in this.
Sanzy
I am curerntly working on my first CIP deal, I have a number of resi investments but looking to move into the Commercial market.
As such it is currently a fairly steep learning curve. At present I have not actually commitied to anything I am doing the DD and have encountered a few questions i was hoping that some of thepeople who have been there done that may be able to help with.
1. The property currently has around 2.5 years left on its present lease. The bank have indicated they will extend a loan for the length of the lease minus 1 year. is this normal for them to fund for the lease term minus 1 year rather than for the whole of the lease term?
2. At what point would a new lease generally be negotiated? would you be looking to sign them up for a new lease with 1 year remaining? Or would you normally be workingout a new lease with around 6 months left of the current lease?
I am approched the selling agent asking if the tenant would be open to signing a new lease and they have said that with 2.5 years left no they are not. So I am just trying to figure out if the bank are just being a pain or if this situation is fairly normal and a new lease would normally be signed around the 1 year mark anyway.
Oh and the tenant is a long standing well established business in the area that I am confident would resign a lease when it was due but I am worried if I will have an issue with the timing of when the loan may need to be renewed verse when the tenant may resign a lease.
Thank you for your help in this.
Sanzy