Ground-Up Office Deal Structure Tips w/ Tenant to Prelease entire building

I am looking for some ideas of how to structure a deal in which a Developer and Tenant want to find a win-win scenario to get this deal done.

Type: Ground-up Class A Office DevelopmentDeveloper:  Very wealthy Developer from the NE that self-finances of their own deals.  Never any partnersStatus:  Project is imminently about to be approved.  Construction commencement depends on pre-leasingLand:  approx 2 acres  85,000 SFCurrent Land Value:  approx. $120M  (based on recent comps)Land Purchase Price:  $12.5M (2014) - All Cash.  No DebtBonus:  Land is located in a Opportunity ZoneGross SF:  537,015 SFRentable:  319,045 SFEst. Annual Rent:  $30-33M / yearEst. Hard Cost: est. $250 PSF or $135M Tenant:  A  International University with 10 global locations that is rapidly expanding their enrollment from 500 students to 5,000 students in 4 years.Tenant Financials:  Tenant wants to sign lease as its own entity, independent from the school.  Investors are in place to guarantee at least 3 years of rent ($90M+)

-  The school believes they have the ability to drastically transform a neighborhood with their tenancy, and would like to be financially rewarded as a partner in the deal with the developer in exchange for leasing his entire building.   
-   Tenant does not just want to be a rent paying tenant - they want a piece of the promote.
-   Landlord has no debt, and in no rush to break ground.  Wiling to wait for the market to bounce back in order to sign leases with credit tenants and obtain a construction loan.

-  Landlord not willing to offer any more than 10% promote saying the value of the building at a refinance/sale will not be as strong given the credit of the tenant.
-  The site is an Opportunity Zone allowing Significant tax benefits for investors


The Developer is looking for an anchor tenant so they can build but no problem waiting

The school wants to lease the entire building ASAP, but wants 30%+ of the promote to do so

The school is also open to bringing in investors to contribute capital.  Where that falls in the capital stack is TBD

Tenant wants 30%+ of the promote so they can sign a lease to begin construction.  That percentage is way to high for the developer - they may be open to giving 10% to the tenant.  What can the tenant do to get more than 10% of the promote, get a lease signed, and allow for construction to begin?

Developer asked if Tenant could bring in LP Capital $ (although not needed), the developer would be willing to give up a sizable amount of the GP as a Co-GP with the tenant.

The Developer has four options:

1.  Prelease building to a point which allows them to take it through development.  Get XXX,XXX SF would need to be pre-leased, and he will build the building.  There is enough equity in the land that they may not even need to come up with any cash.  Problem:  No demand of tenants this size for the foreseeable future, but they have no debt so they can wait

2.  Bring in an equity partner and build the building.  This is a hard option in today's market.  80/20 or 90/10 deal.  Sponsor does not typically have partners in any of their deals

3.  Sell the property for $100-120M based on a recent comp.  Sponsor has no intentions of selling.  The neighborhood is blowing up and they can just wait it out.  No debt on the land

4.  Do the deal with the  School.  This is a harder option because the tenant is looking for 30-50% of the promote.  Maybe the Developer would settle with 25% of the promote to the tenant which is not preferred, but possible .  The only thing this option does for developer is it allows them to build the building today.  Otherwise they can just sit back for the market to readjust.

Latest Offer:

Owner/Developer said:  "If my land is valued at $120M, why doesn't the school come in for $96M (80%) of the land value and be our Co-GP at an 80/20%, meaning Fashion School and it's investors will have 80% of the GP, Owner will have 20%,  with an 8% pref and a typical waterfall."  Perfhaps we can find an Opportunity Zone to come in for a sizable amount of the equity.

I think that we are moving in the right direction with the Co-GP structure.  I also think that it would be a new investment group will be formed that will get 80% of the Co-GP and the School itself will have a percentage of the investment group in order to benefit from the Promote.  Then of course there are fees involved which many will go to the Owner/Developer.

What are your thoughts on how to find a win-win deal for all parties involved?

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