Say you are selling a property, next year and want to lease an empty space, to maximize sale value.
Is there a way to get out paying out a full TI payment, and having the new owner pay for most of it? What would closing look like?
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You could not offer TI in the lease, or add that cost to your sale price to recoup it?
Let’s say you want to sell the building now, but know you have a large TI payment due with a lease you’ve already signed. Generally, the buyer will just ask for a credit to the sale price. So, if it’s a sale price of $100MM with TI and Lc of $3MM, the buyer will underwrite this lease and say, sure, we can take on the TI payment since it’s due next year, but I want a full credit for it if $3MM. So the purchase price of $100MM minus the credit of $3MM means you, the seller, will receive $97MM of cash, and not need to pay the TI/LC out of pocket. Though, theoretically, you are paying for it.
are you under contract? If you are, its easy just a closing credit and have the new buyer approve the terms of the lease. If you are not, I would still say the same thing, a closing credit. You would have to have a conversation though because if the buyer put in an LOI before that lease is signed it has no economic value to current ownership so why should they have to pay it? If you are pricing off of a cap rate that conversation doesnt seem too difficult but I guess it would depend on the parties involved. If you are just marketing it and gaining interest I would say you may have to pay it and just make your hard number for where you will let it go be closer to the guidance.
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