selling a high cost buildout to a landlord - how to go about it
here's the deal - we have an interested restaurant group- two executive chef's, full business plan and menu planned out with concept, with 20+ years industry experience, who want to put a restaurant in a strip center suite we have listed. The site is in a wealthy bedroom community, who we believe is underserved by more upscale dining. Now, the cost to build out the white box suite into restaurant will cost we believe between $135 - $160 per foot and the space is 3,300 SF. We are asking around $16 PSF + NNN (think midwest/plains market) Restaurants are tricky especially now, and there is no way the landlord will front that money, even with amortizing it back into rent. Also, there are no other potential locations in this market where the tenant could do without having the same problem. 

From our perspective, what other questions should we be asking, or options we might have, or should we send these guys down the road? Is this a deal anyone would take?
[{"id": "hpfn26w", "text": "Too many variables to answer your last question e.g. how long has it been vacant, is the vacancy making you suck wind financially, will the TI kill you, etc.\n\nGenerally speaking, right now I'm not sure I'd build out a restaurant without a large, viable outdoor seating situation. A covered patio that could be heated...that sort of thing. Just in case.", "replies": [], "depth": 1}, {"id": "hpfoj4o", "text": "No. That\u2019s nuts, esp right now. \n\nI\u2019m not in this space but I would try to look for an existing restaurant for sale with RE included, buy it on a 7a with extra funds for remodel, and then I could cash flow with a 25 year note.\n\nIn my market restaurants are on fire sale. They would be acquiring for just the value of the RE and maybe the FFE. Or less, even.", "replies": [{"id": "hpgfjpk", "text": "This is it right here, buy RE with SBA and a 25 year fixed note for RE and leasehold.", "replies": [], "depth": 2}], "depth": 1}, {"id": "hpg20b7", "text": "Why do you need the landlord to pay for the build out?\n\nTake what you can get in TI allowance and pay for the rest of the build out yourselves.", "replies": [], "depth": 1}, {"id": "hpg9avu", "text": "There are numerous ways that you can negotiate a buildout expense, you already mentioned one of the more common, being amortizing the TI into the rents. From the sound of it, the Landlord either doesn't have the cash or is unwilling to front money into the deal. If you're looking at, let's just say $150/sf, in reno that comes out to about $500,000.00 on a deal that's probably only worth +/-$264,000 to them ($16/sf x 3,300 sf x 5 years). That's hard for any landlord to swallow knowing they'll only make back half of their investment with no return if you only stay 5 years.\n\nAre you able to pay for the +/-$500k buildout with your loans or capital? Has landlord directly stated that they will not allocate any TI to the deal, or just stated that they won't pay for the entire buildout?\n\nFrom 8 years industry experience, I can tell you that you sound like a promising Tenant, but without the proof of concept you'd get from a national chain, I understand the Landlord's perspective on why the deal doesn't make sense. How does the rest of the center look? Is it full of Tenants? Does it appear well maintained, or is there deferred maintenance? Do you know if this LL owns other properties or are they more of a mom and pop?", "replies": [], "depth": 1}, {"id": "hpgee3b", "text": "They need to come up with cash and not have it fully on you. You could look at partnering in the business as well. I love having restaurant space because it leases quickly once it\u2019s built out. Really matters if you are looking at the asset as a long term hold or just want to fix the vacancy.", "replies": [], "depth": 1}, {"id": "hpgeto4", "text": "Nobody is going to a strip mall for fine dining", "replies": [{"id": "hpgncqi", "text": "It\u2019s done in the north east. \n\nThat being said, ask for a long lease. Take TI allowance and build it out yourself.", "replies": [], "depth": 2}, {"id": "hph5z48", "text": "I can think of three fine dining spots in my city in strip malls. But thanks!", "replies": [{"id": "hph6h16", "text": "Must be a small town", "replies": [{"id": "hph6try", "text": "700k metro area. Not huge", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hpgofld", "text": "I would generally want to get back a TI in about 3 years of base rent. That would put you at the top end $53 psf net.", "replies": [], "depth": 1}, {"id": "hpihhzj", "text": "What\u2019s the proforma TI on a $16 rate?", "replies": [], "depth": 1}, {"id": "hpin9r9", "text": "If that client was approaching our company we might contribute $60K, maybe a little more, depending on the financial resources of the owners, and we\u2019d expect personal guarantees from both.  Longer term doesn\u2019t really move the needle from my perspective, if it is a dog of a deal on a 5-year term then adding another 5 years doesn\u2019t really improve the chances of success.  It\u2019s all about whether the Landlord has a reasonable expectation that rent will be paid.  How much start up capital do they have and how much can they contribute?  Tenants who have skin in the game by contributing to TI usually fight harder to stay in business and make it successful.  Just my $0.02.", "replies": [], "depth": 1}, {"id": "hpissnm", "text": "Will the owners personally guarantee the lease ?", "replies": [], "depth": 1}, {"id": "hpjti04", "text": "Most restaurants don't make it 2 years.  Even fewer make it 5.  They believe the community is underserved.  What if they are wrong and it only takes 2 years to find out?  Even if you do a 10 year am on the TI, you eat $130 psf and look for another tenant who will want another $50 to freshen up the space.  Those personal guarantees don't mean much if the signers don't have a lot of assets.", "replies": [], "depth": 1}, {"id": "hplxlny", "text": "Depending on their previous experience, I don\u2019t think many landlord\u2019s would take on the risk of paying out that much  TI  for 16 NNN unless it was a proven brand. If market TI on $16 is (making this up), $20psf that\u2019s 8 years of term to make the money back. THEN the Landlord is stuck with a restaurant because it will be just as costly to turn it back to office/retail.\n\nIf the landlord does seem keen on the idea i would pitch him two other items: a landlord favorable % rent on top of the $16 net, and make the restaurant group responsible for the costs of restoring the space when they leave.", "replies": [], "depth": 1}]