Success Stories

Tenant Representation:

Tenant Workletter Comparison

Abstract:

A medical office tenant in the process of negotiating a new lease had an estimated build-out cost for their new space of $560,000. The tenant needed to decide between three distinct build-out financing and rental rate arrangements. Admiral developed a cash flow model for each of the three options, enabling the client to make an informed decision.

CHALLENGES:

  • The tenant was not sure whether to accept either of the landlord’s proposals: (a) to cover $100,000 of the build-out cost based on a rent of $36.00 per square foot or (b) to cover $410,000 of the build-out cost at a rent of $44.00 per square foot, with the tenant paying $150,000 for the build-out up-front. Further, if the tenant decided to finance the build-out cost themselves, they needed to compare financing options.

Solution:

  • This client was able to use Admiral’s analysis to make an informed decision and to renegotiate better terms for financing of their build-out.
  • The analysis clearly showed that the most expensive scenario for the tenant was option (b), where the landlord was financing $410,000 of the build-out. The net costs of the lease with tenant financing were not significantly different, whether the tenant was financing 100% or 55% of the up-front cost.
  • In the end, the tenant opted to use the results of the spreadsheet to re-negotiate the terms of the landlord’s option (b), which simplified build-out and payables for the tenant, while keeping the overall cost in line with options (a) and (c).

Client BENEFITS:

  • This client was able to use Admiral’s analysis to make an informed decision and to renegotiate better terms for financing of their build-out.
  • The analysis clearly showed that the most expensive scenario for the tenant was option (b), where the landlord was financing $410,000 of the build-out. The net costs of the lease with tenant financing were not significantly different, whether the tenant was financing 100% or 55% of the up-front cost.
  • In the end, the tenant opted to use the results of the spreadsheet to re-negotiate the terms of the landlord’s option (b), which simplified build-out and payables for the tenant, while keeping the overall cost in line with options (a) and (c).