Humber Real Estate - Course 4, Module 12: Preparing to Lease Office, Retail and Industrial Properties (2023/2024) Already Graded A

Humber Real Estate - Course 4, Module 12: Preparing to Lease Office, Retail and Industrial Properties (2023/2024) Already Graded A What is a Percentage Lease? - The tenant is typically required to pay a fixed minimum monthly rent (i.e. to cover taxes, maintenance and insurance as the bare minimum), plus a percentage of gross monthly income in excess of base sales calculated using the minimum rent - Mainly found in the retail property market - This arrangement creates a type of partnership between the landlord and tenant How can Percentage Lease rates be negotiated between a buyer and seller? It can be dependant on the type of business and certain factors (e.g. volume of business generated per square foot and markup levels of goods sold or services offered). Percentage Leases are generally used to establish a minimum rent as a percentage of income that will _______________________, as sales grow. Revert back to a fixed rent For grocery-type stores that pay a low base rent in a triple net lease, percentage leases provided what opportunity? For the landlord to boost the rent when sales are good, while allowing the tenant to pay only the minimum rent when sales are poor. Most percentage leases include articles or sections to cover what details? - Reporting of monthly sales figures to help the landlord receive monthly interim cheques for any percentage rent due without having to wait until the end of the year - A continuous reporting of sales levels of tenants that enable the landlord to calculate percentage rents, and to monitor tenant success levels and risk of failures What is a Retail Ground Lease? The rental of the land only, and is also known as a land lease or a pad lease. Despite the name, ground leases are also found in office, industrial and recreational sectors, and are common for stand-alone retail or restaurant sites. A Retail Ground Lease is often of a _________________________ involving a tenant who covenants to build a structure on the leased land. The building serves as _____________________________, and upon default by the tenant, the landlord may terminate the lease. Long duration, security for rental payments Why are retail ground leases attractive to both tenants and landlords? - Owners of land in highly desirable areas get an improved site at the end of the lease (typically 10-20 years) for which someone else provided money - Allow tenants to construct a building while avoiding additional capital outlays for the property - Allow tenants to leverage existing financial resources and potentially use land at a lower cost than purchasing the property When can retail ground leases present problems? - If expansion of the building is required - If the tenant needs additional financing and the landlord opposes these changes, given their equitable position as owner of the land and landlord under the lease Base rent is also known as what? Minimum rent What are the 4 different types of rent in commercial leasing? - Base rent - Additional rent - Percentage rent - Fixed rent What is Base Rent? The minimum rent payable by a tenant under a net lease. It is the landlord's determination of the apportioned physical building and the land costs over the lease term. Base rent does NOT include what? The variable expenses of real property. What is Additional Rent? The tenant's proportionate share of the operating costs of the complex, in addition to the base rent, as established in the lease document. When is Additional Rent generally estimated? At the beginning of any fiscal or calendar year for the building. How is Additional Rent paid? As equal monthly instalments, in advance, throughout the period for which the estimate is made and reconciled shortly after the fiscal or calendar year, as defined in the lease. The sum of base rent and ______________ rent makes up the rent for a commercial lease. Additional It's important to advise the tenant to concentrate on _____________________________, rather than the exhaustive list of inclusions often found in net leases. Exclusions to additional rent Items typically included in additional rent can vary depending on the type of lease. In a typical office lease, what does additional rent often cover that is not covered in an industrial property's lease? Utilities Additional rent is usually composed of recoverable items, meaning