Commercial Real Estate Loans & Firearms
We are currently evaluating a prospective tenant who intends to sell guns and ammo. I have never dealt with this type of tenant before, but a few questions:
- Lenders - Will prospective lenders have legal (or moral) limitations on lending with this tenancy?
- Operability - Will this have an impact on the operability of the asset? For example, will property insurance be higher as a byproduct of this use?
So do you already own the building? If so, its not as bad. There will need to be clear discussions with your insurance prior to signing them up. I'd also check with your local county/city on any guidelines. I heard there are some places that prohibit gun stores within a certain mileage radius of schools. I'd also really consider if it might hurt your other tenants and if another vacancy happens. Will another tenant want to be in the same place as a firearms seller. Will you have to lower the asking rent for a potential vacancy? Just do your DD and look at all options.
The bigger issue is lenders are staying away from these businesses, I forgot the term, but I think it was called like the "Sins" clause, where lenders don't finance immoral or potentially reputational harming businesses like strip clubs, gun stores, marijuana dispensaries, etc. A traditional bank lender will want to avoid any reputational damage being associated with these businesses. However, there are still private lenders that will do these type of deals. In the event you need to refi from a lender, you might have limited options.
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