About to sign the 10 year Offer To Lease for an animal hospital in British Columbia, Canada and want to ensure I'm doing this correctly.
Hi there,

I'm not sure if this is the right place to post, but I'm working on behalf of my dad who's a veterinarian and owns his practice in British Columbia.

The practice is growing and needs to expand. There's a new opportunity quite close to his current practice, and we're hoping to be anchor tenants with anywhere from 5,000 - 7,000 square feet.

So far, I've wrote to the real estate agent that:

"We would be willing to offer on the following terms:

Term: 10 years plus two 5 year renewal options

Deposit: 2 months average gross rent due upon subject waiver

Half applied to the first month’s rent when due, balance held as security for the duration of the term.

Tenant’s Condition Period for 45 days


Offer to lease is subject to the following conditions for the sole benefit of the tenant:


Reviewing and approving the Landlord’s standard lease

Approving the Landlord’s base building specifications

Approving the design and cost of the Tenant’s Improvements

Conducting investigations with the City of Abbotsford regarding permitting timelines

Conducting investigation with the City of Abbotsford that the Tenant’s use will be granted a business license in due course

Tenant’s board of directors approving this offer to lease

The Tenant receiving independent accounting and legal advice with respect to the Offer, the Lease and Tenant Improvements
 

Regarding timelines, we'll be asking for an 18-24 month extension on our current lease, coming up for renewal on December 31, 2022, and we hope that'll work well with your new development.


The commercial real estate broker has provided us with the initial Offer To Lease. With the help of a friend in commercial real estate, I then asked for the following adjustments/clarification:

* Is the landlord providing a TI allowance or free rent period in lieu of?

* Can you provide us with a description of the Landlord’s Work or base building specifications? 

* Can you provide us with a draft offer to lease?

* Electrical – what size is the panel within the premises? Including a step-down transformer?

* I understand we will be allowed to request a spot for the in-suite panel location to avoid relocation cost after the fact. Therefore, we’ll need to ensure we have an agreed upon date for this detail, defined with the lease.

* Plumbing line size to be defined. 1”,2”? 2” would be preferred.

* We would like the ability to supply mechanical schematic drawings for our clinic, allowing the in-slab services to be installed prior to slab being poured. And would like an agreed upon date for supply of these drawings.

* I understand we will be provided a breakout cost from the General Contractor for the work, and will need to come to an agreement regarding the upfront fee and construction cost.

* Entrance and Exits – Based on the approved plan, and ensuring we meet the agreed upon dates, we would like the ability to request door locations.

* Plans – Please confirm that plans in CAD format of the premises, outlining the Architectural, Mechanical, Electrical and Structural systems will be made available to us. With updated copies ready at the earliest availability in the form of BP, IFT and IFC formats, including rentable areas and all means of access/egress.

* Regarding contractors, you mentioned: The LL can provide some contacts and we can as well. You will need your own for any work above base shell/LL’s work.



Please note, we'll be looking to add Tenant’s Conditions related to: 

Reviewing and approving the LL’s Work schedule
Conducting investigations with the City with respect to getting a license under the current zoning bylaw.

I understand that the other changes I'm requesting to the LL’s base building specs should be provided to us by our contractor. 
  

I know this is a lot, but is there anything I MUST know prior to signing the Offer To Lease, and what happens when I do?

Thank you very much in advance.
[{"id": "j03qmwv", "text": "Holy shit man. Get a real estate broker to rep you on this.", "replies": [{"id": "j03rber", "text": "No doubt. Overwhelmed here.", "replies": [{"id": "j03rf75", "text": "What market (city) is this?", "replies": [{"id": "j03rno1", "text": "Abbotsford, BC", "replies": [{"id": "j03vupj", "text": "You should be able to find a good commercial broker to represent you. Just find someone that specializes in retail.", "replies": [{"id": "j047ghn", "text": "Thank you for the feedback.", "replies": [{"id": "j04zrqv", "text": "By the way, I am a landlord and am definitely recommending that you get a broker. I would absolutely fleece the shit out a tenant in your situation that is relatively clueless (not in a bad way, you just don\u2019t have the experience) a broker helps level the playing field.", "replies": [{"id": "j07mjmm", "text": "&gt; Triple recommend that you get a broker, really try to find someone who specializes in tenant advisory specifically (a lot of agents rep both tenants and landlords, and in smaller markets it can create a conflict when they are also maybe doing deals on behalf of landlords representing the other side of the table). There are surely good agents that focus only on repping tenants. The landlord pays your agent's fees, and although that money does have to come from somewhere, a good agent will be able to get you a much better deal that should more than cover their fees (that again, the landlord will generally pay). Good luck, you got this!\n\nI appreciate this. I'll be getting a broker and a lawyer.", "replies": [], "depth": 8}], "depth": 7}, {"id": "j059ed8", "text": "Triple recommend that you get a broker, really try to find someone who specializes in tenant advisory specifically (a lot of agents rep both tenants and landlords, and in smaller markets it can create a conflict when they are also maybe doing deals on behalf of landlords representing the other side of the table). There are surely good agents that focus only on repping tenants. The landlord pays your agent's fees, and although that money does have to come from somewhere, a good agent will be able to get you a much better deal that should more than cover their fees (that again, the landlord will generally pay). Good luck, you got this!", "replies": [{"id": "j07ml1v", "text": "Great info. Thank you for your response.", "replies": [], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "j03vua3", "text": "Very likely the only person you are helping by not hiring a broker to represent your dad, is the Landlords broker. Your dad won't pay a broker a dime, he will just forfeit their fee (or a portion) to the listing agent.", "replies": [{"id": "j047ife", "text": "Good to know. Thank you very much.", "replies": [], "depth": 2}, {"id": "j04b44e", "text": "This should be top comment. Absolutely get a broker. It\u2019s totally free to you, and if the landlord won\u2019t pay a tenant\u2019s broker, then they\u2019re probably a shit landlord and you don\u2019t want to be their tenant anyways. \n\nAlso, please don\u2019t use your realtor.", "replies": [{"id": "j07mza2", "text": "Thank you.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "j048350", "text": "Colliers, Avison Young, CBRE, and Cushman Wakefield are the largest commercial brokerages in the Lower Mainland. Frontline does a lot of Valley work. Don\u2019t get a resi who thinks he can do commercial.", "replies": [{"id": "j048dke", "text": "Thank you very much.", "replies": [{"id": "j049wl5", "text": "Sounds like you have a good grasp so far. Good luck!", "replies": [{"id": "j04abpr", "text": "It's quite stressful. As I'm trying to manage a vet clinic now and take care of this relocation. I appreciate it and will do my due diligence.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "j049nol", "text": "I see a lot of people here say to get a broker because it's \"free\" for you. The reality is that in commercial real estate there is no such \"free\" advice.\n\n**ALL** the landlords will include any commissions paid for the tenant's broker into the deal, therefore increasing the rent by by the tenant. And this has been my experience with a lot of landlords that  have worked with.\n\nIf you decide to negotiate with the LL directly (assuming that you have enough knowledge ) might save you money, considering this is a significant deal : 10y x 7,000 sq.ft. x 25 -30 psf.\n\nOne of the  biggest challenges for this deal would be the due diligence stage from your end especially if you have to build out the space, and this includes construction cost, timelines, approval from the city, having all required permits in place and trades (architect, engineers etc.).\n\nAn approach that you could have is to have the LL build the space for you (so you don't have to deal with all the headaches ). Most likely they will include some/ all the cost into the deal as Tenant Work .\n\nI am in the same market (Greater Vancouver area) as you and I know how difficult is to do business in some of the cities around Vancouver.", "replies": [{"id": "j04buzg", "text": "&gt; 10y x 7,000 sq.ft. x 25 -30 psf.\n\nCorrection, 10y x 7,000 sq.ft. x $38 psf. for new builds in Abbotsford. That's the going rate, I'm told. But, is negotiable.\n\nThis is a really helpful comment, and I'll save and share it.\n\n&gt; ALL the landlords will include any commissions paid for the tenant's broker into the deal, therefore increasing the rent by by the tenant. And this has been my experience with a lot of landlords that have worked with.\n\nInteresting, I was unaware.\n\n&gt; One of the biggest challenges for this deal would be the due diligence stage from your end especially if you have to build out the space, and this includes construction cost, timelines, approval from the city, having all required permits in place and trades (architect, engineers etc.).\n\nWe have been in touch with a construction company who has built-to-suit a number of animal hospitals and has provided us with the preliminary timelines for our new build. They've already provided me with a number of questions to ask, and conditions we must include, so that's good.\n\n&gt; An approach that you could have is to have the LL build the space for you (so you don't have to deal with all the headaches ). Most likely they will include some/ all the cost into the deal as Tenant Work .\n\nWe'll be signing as anchor tenants in this new development for minimum of 10 years. Likely bringing on our own construction company. Not sure if that's advised, or you'd recommend we \"have the LL build the space for us (so we don't have to deal with all the headaches).\"", "replies": [{"id": "j04g6ok", "text": "I have been involved in both cases (spaces built by tenant and spaces built by LL where I was a property manager/project manager):\n\nOption 1) if you decide to build the space with your own contractor, make sure you take into consideration the implications of delays in occupancy,\n\nLet's say your monthly rent will be ($38 base rent + $15 additional rent) x 7,000 sq.ft. = approx. 31k / month. a 3-month construction delay will cost you 93k. This number can quickly go up with with any additional delays.\n\nFrom the LL's perspective, the LL has his own proforma to meet and if the lease payments will start on a specific date ,regardless if the construction is completed or not, payments will have to be made. \n\nOption 2) if the LL will build the space for you, most of your risks will go away. Most of the times, a developer might build the space faster &amp; cheaper if they have their own construction crews.\n\nAnother consideration that many people (brokers/tenants) forget/ignore is the Restoration clauses of the lease. Some landlords (especially those who are a bit more sophisticated) will have a Full Restoration clause in the lease. This means that at the end of the lease the LL has the right to demand the tenant to bring back the space to its original condition OR any other pre-built condition. \n\nLet's say if the cost to build the space will be $200 psf it will cost you another $100 to restore the space when you vacate. \n\nHaving said that, there is value of working with a good broker who understands commercial real estate &amp; construction and can provide **value**  to you.", "replies": [{"id": "j04lx2r", "text": "Holy smokes. This is incredible feedback. I don\u2019t have time to go into it in too much detail, but thank you very much and I\u2019ll be returning back to this plenty of times.", "replies": [], "depth": 4}], "depth": 3}, {"id": "j04kcan", "text": "More times than not, the fee goes like this: Joe negotiates with Landlord and doesn't have a rep. Landlord broker (the nice guy/gal who is actually not negotiating on your behalf but rather the landlord's) gets 5-6% fee. Alternate scenario: Joe hires a broker to represent him. Total fee is 5-6% (same) but the kind Landlord broker has to split it 50/50 (give or take) with Joe's broker. At least Joe has someone representing his interest. Unless you're negotiating with a LL direct (IE no agents) the cost to hire a broker for yourself is usually minimal.", "replies": [{"id": "j04mjub", "text": "Thank you very much for the breakdown. This is super helpful.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "j04k01d", "text": "im based out of the lower mainland. if you want to chat some more about this shoot me a PM.", "replies": [{"id": "j04njz7", "text": "OK, great, I just may!", "replies": [], "depth": 2}, {"id": "j052wxl", "text": "\"Dad, I got some really good advice on reddit from DryFuckSamson, seems like a great broker\" \n\nlol, couldn't help myself.", "replies": [], "depth": 2}], "depth": 1}, {"id": "j059357", "text": "Maybe this is obvious\u2026 but this appears to be an LOI and should be non-binding until you execute a contract. Make sure the LOI is clear on this.\n\nAs many have mentioned, find a good commercial broker who does exclusively commercial. I\u2019ve never met a good combo resi/commercial broker who doesn\u2019t get totally screwed on a commercial deal. A good broker will know what is within market and what is out of line.\n\nHire a real estate attorney to review your contract once it is drafted.", "replies": [{"id": "j07nm52", "text": "&gt; Maybe this is obvious\u2026 but this appears to be an LOI and should be non-binding until you execute a contract. Make sure the LOI is clear on this.\n&gt; \n&gt; As many have mentioned, find a good commercial broker who does exclusively commercial. I\u2019ve never met a good combo resi/commercial broker who doesn\u2019t get totally screwed on a commercial deal. A good broker will know what is within market and what is out of line.\n&gt; \n&gt; Hire a real estate attorney to review your contract once it is drafted.\n\nThank you for your feedback. It is an LOI and I am unclear if it's binding or not. I will make sure the LOI is clear on this.\n\nWorking to find a good commercial broker and lawyer now.\n\nThanks for the feedback!", "replies": [{"id": "j0zqf81", "text": "Absolutely! Good luck to you -- Keep us updated with how it goes.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "j05dmjf", "text": "Hire a broker. It costs you $0.00. I don\u2019t understand why people would do this alone.", "replies": [{"id": "j07n2ss", "text": "&gt; Hire a broker. It costs you $0.00. I don\u2019t understand why people would do this alone.\n\nWill do!", "replies": [], "depth": 2}], "depth": 1}, {"id": "j06l75k", "text": "A broker will help with the economic terms, but it also sounds like you need a project manager for the buildout and move. Brokers (in my experience) are not nearly as qualified for the buildout side as they sometimes make it sound like they are. If you go with one of the big firms, they will have a project management team you can hire.", "replies": [{"id": "j07nvn6", "text": "&gt; A broker will help with the economic terms, but it also sounds like you need a project manager for the buildout and move. Brokers (in my experience) are not nearly as qualified for the buildout side as they sometimes make it sound like they are. If you go with one of the big firms, they will have a project management team you can hire.\n\n10-4\n\nThanks for the feedback. I'll look into project managers.", "replies": [{"id": "j07oft7", "text": "It\u2019s a lot, but keep everybody in their own lanes and you\u2019ll be ok.", "replies": [{"id": "j07pl7z", "text": "Will do. Thanks again.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}]