Any way to raise tenant $$ upfront to complete?
Hi

I have a few questions. I'm trying to help a friend save their commercial building.  There is a restaurant at the bottom that is being negotiated upon.  $4000/month is regular rent price.

Also, there is space upstairs for two other businesses.  

The building has Lien holders.  Mortgage to the holders is behind along with taxes, and build is still required. Lien holders do not want to take the building. 

I am wondering, if there was options or leasing agreements that could be struck.  To help all parties out?  Such as, the tenants paying $2000/month up front as an option which is non refundable, if tenant leaves and etc.. All while the tenant pays a much lower of  reg rent during the term.  Or paying upfront as part of the lease for a year to several years.  And, reduce the overall rent by half for the term of the lease/option..  

This would be to raise funds to finish the build of the building, pay taxes, and negotiate a clean slate with the lien holders..

Also, I would want to make sure an agreement between every party. Where the tenants can't be forced out upon foreclosure/sale/ or new landlord. If possible as well.

I hope I was able to explain things well enough. If not let me know.  Looking for some type of way to raise money from a few tenants upfront to save the building. With some way to help all parties.

Thanks for the help 
[{"id": "cz3yvuv", "text": "Maybe check /r/landlord as well.\n\nRent escalations are pretty much standard in the industry, but I have only ever seen one lease with a de-escalation as you are describing. But yes, you can negotiate a lease to have increases or decreases throughout the term. You are saying you need an extra $2k/month for a year or so, so a total of $6k/month? The issue with de-escalations is that any time a business moves, it takes them a long time to really hit their \"stride.\" That is why most leases start at a low rate and get higher through the term. Here are some things I would consider:\n\n* First of all, if you haven't appealed your property tax assessment, do that immediately. My office automatically appeals every tax assessment on every building no matter what.\n\n* You need to get the occupancy to 100% immediately. Talk to a local tenant rep and have them bring you tenants. Of course, you will need to cover the cost of a lease commission when they do manage to bring you someone.\n\n* You also need to check to see what the going rate, per square foot, you market is charging for retail space. It could be that $4,000 is a steal and the building could charge more. Sure, the building next door might charge $4,000, but that space could be smaller or the tenant might have have an escalation schedule.\n\n* You can include a percentage rent clause in their lease. This means you get a share of the tenant's net sales (usually in exchange for a lower rental rate).\n\n* If the tenant is signing a NNN or base year lease, give them a 2015 base year and have them pay an additional monthly CAM charge for estimated 2016 expenses. This will give you cash upfront and have the tenant pay for their share of the taxes/etc.\n\n* You may consider offering them a \"gross lease.\" This means that you have to cover all utilities (insane idea if your tenant is a restaurant) but they have to pay a higher rental rate. You could take a look at how much the space costs when it's fully occupied, then charge, say 200% of that. The fact that the tenant won't have to pay for these costs is an incentive, and they may be glad to overpay on the rent if it means not worrying about more bills to pay.\n\n&gt;Where the tenants can't be forced out upon foreclosure/sale/ or new landlord. \n\nLook up \"quiet enjoyment\" in your state. Chances are, it's illegal to force the tenant out, but take a look at your quiet enjoyment laws. ", "replies": [], "depth": 1}, {"id": "cz40vqn", "text": "Not speaking to the rent, but if you want to prevent the tenant's from being forced out you are likely looking for a [SNDA](http://www.millernash.com/where_foreclosing_lender_meets_commercial_tenant/) . \n\nIf the lien and mortgages were put in place first they are superior to any lease agreement and would have to be subordinated (explained in the above link.  In virtually all cases, you would need to get the SNDA agreement signed by any lien/mortgage holders to guarantee the tenant's rights to stay in the space.\n\nAs to the rate structure, you can negotiate anything you want, heck you can even have tenants pay a bunch of rent up front as long as the general terms are acceptable to all parties.  The challenge here would be coming to terms.\n\nI am biased (a broker), but I highly suggest hiring a good broker or paying an attorney if you are going down this path, even if it is just to make sure the documents are in order.", "replies": [], "depth": 1}, {"id": "cz7grrh", "text": "Give us some numbers here...need more meat to chew on..\n\nWhat does the current capital stack look like?\nAmount of liens?\nHow much are the taxes owed?\nBy saying \"Build is still required\" do you mean your friend still has to do the build out on the restaurant as tenant improvements?\nHow much in TI does he have to do.\nSo going by your $2000 per month upfront, will 1yr $24000 or even 2yrs $48000 cover what's needed?\n\nHopefully your friend bought this in a special purpose entity. If so, it might bee wisest to try and cram down some of the lienholders by threatening BK and refinancing into a bridge loan.\n\nNo offense to your friend..but it sounds like it's being mismanaged and poor decisions are being made. Good operators make bad deals better...bad operators make bad deals worse. I say this on the face and not knowing any numbers on the deal. \n\nI own a CRE finance advisory...see smilar scenarios all the time..your buddy sounds like a bad sponsor and may need to fire himself! :)", "replies": [], "depth": 1}]