Creative solutions for occupying a commercial premises

[Martyn Fleming]

I'd be very interested in hearing your story in how you achieved a good outcome as a business owner (or anyone representing the owners).

I'm particularly interested in arrangements that would not be considered 'mainstream' in a typical commercial contract (sale or lease). I'd like this to be a brain-storming discussion thread, with few boundaries. Your story could involve leasing or buying and any permeations in between or beyond.

I'm really interested in innovative exchanges you negotiated in your transaction or ongoing arrangement.

 

[Kristine..]

Qi?

Welcome to the Forum but what is the point of the thread?

 

[Bird Dog]

Welcome to the forum Martyn.

Can I start by saying you may struggle to get a lot of detail in this thread as most owners like to keep their special "deals" private..
As they say, once you publish... it's no longer private and is most definitely permanent so most would be a little gun shy in announcing their special terms they had previously negotiated.

I will however publish a tip from a a colleague of mine that he just negotiated yesterday just to start things off..

He is trying to get a liquor license for a new club (building is brand new) and has managed to keep the owners happy with just a promise to rent.
It's now getting to the stage however that they want him to start paying rent otherwise he'll loose the leasing rights.
So, rather than pay rent he has agreed to install $30,000 in HVAC as he knows that given it's a new building, the owner can use this to attract the next tenant if his deals fails and he has to walk.
He also knows however that this would be his cost under the current arrangement so he has proposed the pay for it as a gesture of good will which results in a win-win outcome.

Would like to hear others suggestions as this could be a good thread.

cheers

B.D

 

[Martyn Fleming]

To clarify: I'm interested in few dimensions:
Different sized business entities- I know this discussion could vary quite considerably between large business entities and those making the brave step out of their home-based operation. I'm just as interested in those solutions for small business operators as I am for the corporate and large franchise entities.
How purchased or leased? - (Anything relating to how the asset or finance structuring that was a little unique) Could be directly by the business entity, a blend of ownership, SMSF, vendor finance, MBO, etc.
What was unique in the exchange? - Could be anything from time, effort, affiliate marketing, use of machinery, ... the list goes on.

For example (and to get the ball rolling), I know a one-man band who occupied a small office space within an accountancy firm's larger office space. He occupied the space rent free for the first 12 months, yet delivered a high level of lead generation for the accountancy firm. This was a creative solution for a small operator who didn't have the financial strength to commit to a lease or purchase, but had something else to offer until his cash flow position was ready to take on the commitment. Once the 12 months had expired and the model proven successful, the operator reverted to a paid sub-letting and referral arrangement.

 

[Martyn Fleming]

Hi Kristine - My goal for this thread is to help broaden our minds as to what's possible for business owners. What I find exciting about commercial property is the diversity in the deals, yet I'm sure there is much to learn from each other's experiences - what's worked and what hasn't. Bird Dog's post is a great example what I'd like to see exchanged in this thread.

 

[chilliblue]

As a buyers agent, why not give a few examples that you have encountered?

 

[Martyn Fleming]

As a buyers agent, why not give a few examples that you have encountered?

Hi Chilliblue - Good to meet you! You look like you've been around the traps for a while.

Another example?
I had one client involved in buying two floors of office space in the CBD (approx 4,000m2 in total). The vendor and buyers weren't seeing eye on price and there was insufficient elasticity for them to ever meet without something else being included in the deal.

We explored other areas to make the deal more attractive and while we managed to rope in a few more conventional bonuses, we also managed to secure the 'building naming rights'. When it comes to value, I found this was really interesting and it took some research to figure out what this stuff is worth. Once agreed in principle, negotiations then moved to the name itself (the other tenants have to live with it), $$ value, what sort of signage we could use to declare the building name, etc. It ended up quite the little can of worms, but well worth the exercise as it enabled the transaction to go ahead.

By the way, I am genuinely humbled by the collective property expertise and knowledge in these forums and in the industry itself. Of course, many clients don't need creative solutions, so the opportunity to test the boundaries is inherently limited (which is why I'd love to hear from other people as well). However, I'm finding the current market seems to be generating more need for creativity to help deals succeed.