Mou or moa help!?  Lease bonding?
First off, my company is a small family owned business that i have been running for the past 6 years.  After our largest client got bought out and noved out if state we went through the downturn like everone else... Cheaply.  

Now, I have filled our current 2 warehouses (175k sq ft) and am looking to expand.  Our firm is now looking at buying a large commercial building at auction.  By large I mean 300k sq ft +.  Before we bid we are requiring the potential lessee to sign an mou / moa agreeing to lease the entire facility at a predetermined rate based on the auction price (% wise).

My question is does anyone have quality mou / moa templates for large scale commercial real estate, or experience with them?  I know they are binding, but how much so?

The other problem is that it has happened so quickly.  After 3 years of having people tour the building, these guys contact me 72 hours before saying they want to lease it.  Auction starts tomorrow, ends Thursday, and I need to make sure I have everything in place to get this deal done.

I have cleared it with our bank, with our owner (my grandmother), the accountant and lawyer but havent had them make anything specific up yet.  Am I missing anything?

In addition to the mou / moa, it is an absolute triple net lease.  I was wondering if anyone has any experience with companies that provide rent / lease value bonding too.

Thanks in advance, from a long time lurker, recent sign up, and even less active poster!




[{"id": "c4zdudu", "text": "Commercial Broker here with a lot of industrial lease experience.\n\nOut of my own curiosity, what state are you in?\n\nI am guessing you are trying to save a few buck as well as time by leaning on Reddit to get this.  I would seriously reconsider.  While great for some uses, legal document and binding agreements of this magnitude should be tailored to your specifications.\n\nWhy doesnt your attorney have this document? with such are large lease on hand, you will want to consult your attorney to make sure you are protected on this...I know from a liability stand point, it would be difficult for anyone to hand over a template unless they were an attorney(license in that state), which I am neither.\n\nPM me if you have more questions as it seems like you may need to start getting creative.\n", "replies": [{"id": "c4ziz4j", "text": "Very much so using our attorney.  Not really trying to save money at this point - considering the deal will be about 1M overall, the extra 5k for lawyers isn't a big deal.\n\nI was just looking for more ... real world experience if there was anything out there, instead of \"what my lawyer says.\"  He does have this document, we have just been trying to do everything WITHOUT spending anything until we have an agreement in place basically.  \n\nI've had these guys through the space 3 times over the past 3 years - and they call 72 hours before the auction saying they want to get in?!  Come on, can it be any more of a time crunch?\n\nAuction starts today at noon - ends Thursday at noon.  So we have some time to get an agreement in place but getting the principles from their place to sit down (one gentlemen is in his 80's and does it on his time) is impossible.\n\nI guess the point is we need to have the MOA / MOU in place before we bid - and I wonder what the quality of that contract / binding ability is.\n\nSorry if I am kind of vague!\n", "replies": [{"id": "c4zk178", "text": "totally understand where you are coming from and trying to put these deals together are stressful but potentially worth it.  Obviously like previously stated, I am not an attorney and not giving any legal advice.  From a real estate brokerage \"structuring\" stand point an MOA /MOU ***could*** be good, but why would you want to deviate from the original lease contract? I would think you and this potential company would want to keep things as \"simple as possible\".\n\nA lease with a contingency rider...i.e. if said building is bought, you will honor the contract (same thing, different route).  My thought is that you want to have the lease contract as strong as possible (obvious) and as close to complete if not complete with an options to cancel, contingency rider, something to that effect in the event that the bidding goes over your price and/or YOU cannot fulfill your obligation. \n\n&gt;getting the principles from their place to sit down (one gentlemen is in his 80's and does it on his time) is impossible....\n\nHilarious cause I can see this playing out like a scene out of Wall Street, but I digress.  If the economics of the deal are hammered out already than it may make some sense to have your attorneys and them sit down to go over the lease document due to the time constraints.\n\nYou are taking a huge risk in this and in these economic time, what is to say you have everything inked and they go bankrupt 6 months down the line? this could happen in any situation.  If the contract value is worth $1MM, I would make sure they are financially sound.\n\n* Do you have financials on them?\n* Are they willing to Personally Guarantee the Lease?\n* Is there any negotiated TI? and if so, how much?\n\nI dont think you're being vague, I think you may not have the full experience to maneuver through the deal and be creative...its not anything personal against you unless you were in the real estate business.\n\n\n\n", "replies": [{"id": "c4zmgre", "text": "Great info &amp; great point on the lease.  We have a lease - why not just add a contingency point of \"buying the new building.\"  PERFECT.  \n\nYes - we have seen the financials.  Old company (3rd generation), very local, lots of assets, and yes personal guarantees from 2 of the 3 generations (the 3rd is still young, my age @30 and hasn't done much other than travel and sales).\n\nThe TI was new to me.   We called it \"FIT OUT\" around these here parts in Pennsyltucky.  There is ZERO TI.  The rate we are offering is low enough that he can do what he needs to do and still get ahead - although we would (@ the end of the day) net almost 60% before taxes.  So... over the 5 years of their lease I COULD (if I saved all our income) effectively pay off the entire loan.", "replies": [{"id": "c4zopb3", "text": "Good to hear there are some options for you as it sounds like you may be closer than you think.  Tenants these days will for the most part go for the path of least resistance; especially since aggregate vacancy is up.   \n\nThat is great that there is NO TI/Fit out, In Illinois we call it TI/tenant improvements, but always interesting to find out different terminology. Always a huge bonus to the ownership group factoring present value of the \"investment\" vs. potential risks.\n\nAlso, regarding the income and depending on your investment strategy, it may make some sense to talk to an accountant and your commercial lender to see how you could leverage that income or if it would be best to pay down the loan.  Some times it doesnt make sense as you want to have a line of credit or an escrow for broker commissions, Fit out costs, etc. that you dont want or dont have the cash on hand...just my two cents.\n\nIf you need any other help, feel free to PM me.", "replies": [{"id": "c50fzk2", "text": "There is action on the auction, but not with us!  They won't even take my phone call this week.  People drive me nuts.", "replies": [{"id": "c50jxib", "text": "if you have never been to a property auction, they MOVE REALLY FAST!  Pay attention, have your price point and make sure your auctioneer where your siting knows where you are and ask him/her as many questions as you need to feel comfortable.  GOOD LUCK and let me know how it pans out!", "replies": [{"id": "c50rt0d", "text": "Was a 48 hour auction.  We didn't bid as the client never came back to us.\n\nWas sitting at 500k for all of 70 hours, then the last hour it went up to 1.2M.\n\nThe reserve was not met, and the building was not sold.  \n\nEdit: Thanks for the info :D", "replies": [{"id": "c5hl7um", "text": "Total newbie here: (I plan on buying some commercial real estate sometime in the next three years, depending on how my other ventures go, and I'm just lurking about and trying to figure out how this sort of thing works.)  \n\nAre 'reserve prices' really all that common?  I would think that if someone was on the up and up, they'd start the bidding at the lowest price they are willing to accept;   as a potential buyer, I'm not sure I'd be interested in wasting my time if I knew there was a reserve price that might very well be more than I was willing to pay.  I mean, I understand that on an ebay auction, the seller is going to set a reserve, because they think irrational buyers will work themselves into a frenzy upon seeing the lower price; but I would imagine that cooler heads would prevail when spending seven figures.  \n\n\nOf course, there are a lot of those sorts of things that seem really shady that are completely normal, and you put up with it or you don't do business.  ", "replies": [{"id": "c5hmygf", "text": "A lot of auctions have are not absolute where they have to accept your offer.\n\nMost have a reserve, but start the price lower to entice more action and more bidding from multiple parties.  \n\nI would be nice to know their minimum.  I sort of did know off hand because I have been working with him on the building for 4 years now, and am still working on a lease with that same client - hoping for a January 1 lease / purchase date.\n\n", "replies": [], "depth": 10}], "depth": 9}], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}]