Question: Looking to Renew NNN Lease with Corporate Tenant
I purchased two NNN single use properties. Both properties had preexisting leases in place to a large regional bank. Expiration of the leases is 7/31/23.

The Tenant has two remaining options to extend.

From looking at the documents the seller provided the leases originated in 2006. The tenant renewed their lease on November 2016, with a July 2018 expiration. So around 21 months out. I am now around 20 months out to lease expiration.

My question is how would I go about seeing if the Tenant a large regional bank wants to extend their lease. I really would like them to extend their lease. I want to do this in the best professional way.
[{"id": "hn3m4ff", "text": "Well I think step one might be to contact your tenant.", "replies": [{"id": "hn7tws8", "text": "I know that. I should have rephrased my question to what is the most professional corporate way? Certified letter through a lawyer?", "replies": [], "depth": 2}], "depth": 1}, {"id": "hn3ngf2", "text": "Contact your broker. They should have comps on active leases. Normally you reach out 6months ahead of expiration in writing and ask if they wish to renew or if you should start advertising the space.", "replies": [], "depth": 1}, {"id": "hn3nvut", "text": "What is their notice period? You're not going to get an answer until closer to the deadline, say 12 months. Just write a letter or ask them when you talk to them? Do you have a leasing broker? a PM? do you have research on vacant comps? \n\n&amp;#x200B;\n\nthey may want to negotiate price and you should be ready.", "replies": [{"id": "hn7v86z", "text": "So I purchased this property through an auction site so I do not have a commercial broker. The broker I use for residential and multi family suggested I reach out to his lawyer.\n\nThe thing is Comercial real estate firms have been hounding me to list these properties for sale. I would rather extend the lease and collect the rents. However, I know it is very important to get the lease resigned or the value of the property will drop significantly without a tenant. \n\nSo I am looking for the correct most professional way to go about trying to get them to exercise their option as I usually deal with more Mom and Pops and I just ask them. I am trying to see if there is a way \u201cto kick the tires\u201d and see if they are interested in extending or I should try to sell while there is still time left on the lease.\n\nIn regards to lease renewal comps should I be looking at retail, single tenant properties, what banks are getting, how specific should I go.", "replies": [{"id": "hnateo7", "text": "1 - Ignore calls from brokers trying to list your property for sale. Everyone is getting those calls every day in this market.\n\n2 - Do your homework. Find a leasing broker to run some comps for you on other bank leases, including this bank\u2019s other locations. Also have the broker run comps for other potential tenants - QSR, Starbuck\u2019s, office, etc so you can see your other alternatives.\n\n3 - Call the real estate/faculties rep for the bank. I\u2019d probably play up the naivety/newbie card and see if they\u2019ll share any early thoughts with you. They probably won\u2019t give you much, but this is just a fishing expedition for you. Follow up with the rep as needed as you get closer to the notice period.", "replies": [{"id": "hnbkd5e", "text": "Thanks for the reply. When using leasing broker for comps is this something they will do for a flat fee or do they get a percentage of rent, how are they compensated", "replies": [{"id": "hncepij", "text": "Compensation is negotiable but it should not be a commission (percent of rent). You\u2019re just collecting market info at this point. Most brokers will likely provide it for free in exchange for some info from you (about your lease) and the assumption that you\u2019ll come back to them if/when you\u2019re ready to take it to market for a new tenant. Consider how much work you\u2019re asking them to do and offer them a flat rate if you\u2019re really asking for a lot of data. \n\nWho knows where you\u2019ll be in 20 months with this bank tenant. I would help to have a broker in mind before they\u2019re needed.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "hngu0ku", "text": "You got pretty good answers from beluga. Did you reach out to his lawyer? I do this type of stuff for some of my comm clients. Its not a normal legal task though. \n\nI agree totally with you wanting to extend the lease, you have a lot more value with a longer lease, but if you're worried about not getting a tenant, you can sell now to eliminate that risk--I presume you're positive equity from an auction site.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hn3oxqr", "text": "Go to the bank's website, and look around their management section. ( I realize that not every bank is going to have this information, but it's the logical place to start.) You want their administration section. ideally, there would be someone listed as being responsible for facilities. Lacking that, go for branch administration. Reach out to someone in that area, and describe your situation. I wouldn't tip my hand about the renewal question, if I were you.  Once I found the responsible person (who probably isn't the ultimate decision maker) I would simply say that I was the owner of the building their branch was in,  and that I wanted to make sure they could contact me if they needed to.  They may be very forthcoming about future plans, and they may not.  But at least you will have a contact point.\n\nYou may already be aware of this, But something to be concerned with: as more people do all of their banking online, banks are reducing their expenses by closing and consolidating branches. If they decide to close your branch, you will be stuck with an empty building that may be hard to find a new tenant for. Good luck.", "replies": [{"id": "hn5jg5b", "text": "If that is the case and the tenant vacates, the market for vacant banks is pretty hot as they are redeveloped all the time as they usually have good location (at least in my market). Medical offices and marijuana dispensaries are the two I see most often.", "replies": [], "depth": 2}, {"id": "hn6z0l7", "text": "People have told you to read the lease, which is key for finding the appropriate renewal notice period. But also there should be a second section about where to send written notice of issues pertaining to the lease, this will have the contact information for the bank\u2019s POC/attorney. I\u2019d start there. Hopefully it is still relevant. If not, LinkedIn sales navigator can help you find the correct facilities/real estate department person.", "replies": [{"id": "hn7won1", "text": "Is there a way I can try to gauge interest. If they are not interested in exercising their option I may try to sell before lease expires.", "replies": [{"id": "hnbrqvq", "text": "Not likely. I guess it depends on the bank and how big they are. Some companies probably won\u2019t even evaluate it until it gets closer to LXD. But you can ask if you find the correct person. If they say they\u2019ve been closing a lot of branches or expanding that could give you a hint. \n\nYou\u2019re not likely to get a very optimal sales price with a short lease term left. I\u2019d ask a NNN sales broker to help you evaluate. It may be better to wait as you can sell it vacant to a user or have the tenant sign a longer lease to an investor..  but only a few years left puts you in a tricky spot to sell. But there are many factor\u2019s to consider and you should speak with an expert.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hn4lx8h", "text": "Read the lease. It should have a defined time period the tenant needs to provide notice of their intent to renew. Usually a several months prior to the lease expiration date.", "replies": [], "depth": 1}, {"id": "hn544f3", "text": "Read the lease, know it cold, then.....uhhhhhmmm..... Ask them.\n\n(That tends to be the best way I've found to open a discussion).", "replies": [], "depth": 1}, {"id": "hn5gm3i", "text": "Do a Google search for FDIC SOD. Then look up the deposits at each of these branches and how they compare to other branches of the same bank in the same region. Also look at the historical SOD for these branches to see the deposit trend over time.", "replies": [{"id": "hnw3c1k", "text": "Commenter above nailed it.  Below is the link to the report showing all bank deposits in any zip or MSA or city.  \n\n[https://www7.fdic.gov/sod/sodinstbranch.asp?baritem=1](https://www7.fdic.gov/sod/sodinstbranch.asp?baritem=1)\n\nI have done a ton of bank transactions and they use this all the time to evaluate competition.   Once you know the deposits relative to competition and other locations it may change your attitude about renewal.  Or maybe if you don't hear back right away this should give you some good data for what to think of that.", "replies": [{"id": "hzwxzt2", "text": "Hey they have strong deposits is this this the most important thing when negotiating the market rate for renewal", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}]