Hi, speaking from a landlord point of view, what are some other alternatives to TIA (tenant improvement)? Also how do most Landlords calculate how much TIA should be given? Thanks
[{"id": "exs7ncq", "text": "Alternatives are turnkeying the space or giving reduced or free rent instead of TI. Amounts are highly variable based on existing conditions, credit of the tenant and length of lease", "replies": [], "depth": 1}, {"id": "exsc1ku", "text": "Some other popular  alternatives to a Tenant Improvement allowance include\n- free rent\n- allowing early occupancy\n- lowering the total rent\n- option to extend the lease\n- option to purchase \n\nThese of course are just a few. In a lease contract negotiating stage, there are many ways to change the lease language to make the document more landlord friendly, tenant friendly, or a nice compromise. Attorneys are infamous for cutting up lease language to protect their clients interest. \n\nNegotiation is give and take, so landlords \u201ccalculate how much TI should be given\u201d based on the other things being negotiated (see above examples). For example, if the tenant wants a large TI allowance, then the landlord is probably going to ask for full price rent, or a longer lease term, or a personal guarantee. So give and take because the landlord gives a large TI allowance but expects something in return. \n\nIn terms of actually calculating how much TI\u2019s cost, the vendors that do the actual tenant improvement work give out job quotes. Landlords have relationships with vendors that do TI work on their units, so they are able to get a reliable estimates for the proposed work.", "replies": [], "depth": 1}, {"id": "ext50wq", "text": "There isn't really a hard and fast rule for calculation. A lot of it is market specific. In general, most landlords are projecting a specific rate of return for the asset. Some landlords are more worried about value and some are focused on cash flow. Capital is limited for some and abundant for others. The owner that is planning on a 3-year hold will act different than the owner than is planning on holding indefinitely.\n\nIn addition to what was mentioned by the other comments, there are a few other items that come into play. Expense reimbursement structure is a big one for retail but can come in to play in office as well. Landlords also offer extension options, signage, capital projects (lobby renos, repaving parking lots, new elevator banks, etc.) and anything else you can think of. In one of our buildings, we pay for gym memberships for the tenant's employees because it is cheaper and less permanent than installing a gym. We also pay food trucks to come three times a week so we don't have to put in a cafeteria.  There are lots of different options aside from TI.", "replies": [], "depth": 1}, {"id": "ext67h4", "text": "For Mom and Pop shops, we cap our TI expenditure at 40-50% of the total TI budget. For national credit, you can safely be more aggressive. Another user mentioned some other variables but pretty much all options can be on the table.", "replies": [], "depth": 1}, {"id": "exwfagb", "text": "Thank you guys! I am stuck right now with a new tenant that is wanting to lease they want $25/sqft but I feel like like $18/sqft is all that is needed. I just wanted to know what creative ways people have structured to get this TI to work. Specific to me, I don\u2019t want to lend out capital.", "replies": [{"id": "ey5vf2o", "text": "Another thing not mentioned here is to ensure that the Lease has very strict and specific terms for payment of the TIA to the Tenant. They need to provide all supporting documentation that the work was completed, and paid for (invoices, unconditional lien waivers, permits, etc.). Additionally, the language needs to read that \"Landlord to pay tenant **UP TO** $18 /sf, provided tenant supplies Landlord with the following documentation:...\" or something similar. Basically, you don't want to just write them a check for the amount requested, and then have them not even use all of the money. Assuming that you are using an attorney to complete the Lease work, I am sure they are already including this language.", "replies": [{"id": "ey85m7v", "text": "This, you do not want to reimburse a tenant for a contractor's TI work only to find out that the contractor was never actually paid. A contractor's lien encumbers your title and may trigger action from your lender if there are any notes on the property.\n\n\nAdditionally, I would also recommend as a best practice to have the amortized payment schedule included as a lease addendum and the schedule commencing with lease payments.", "replies": [{"id": "ey86501", "text": "Absolutely, additionally, if you allow your tenant a termination right you need to ensure they are paying back any unamortized TIA, brokerage fees, etc.", "replies": [{"id": "ey86db2", "text": "Yes! Familiarize yourself with all the CYA clauses.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}]