howdy folks. I'll get right to it.
I am working on getting an internship with a RE retail investment group, they only have one office for one candidate and there is certainly some comp. I actually have been able to get a broker from CBRE to email a letter of rec. on my behalf, and I met the CEO of the group selling windows, so he understands my ambition and willingness to work.
During my phone interview, the complexity of retail leases, the only thing this group does, came up and the CFO make it very clear that I need to understand the basics of these leases by April, when I will be given the response of whether or not I got the internships. While I have a back up internship rolling, I'd hate to lose this opportunity. So my question is this:
The CFO recommended 2-3 books about retail RE & retail leases, that I have bought and plan to begin reading asap. But should I also try to resource my school, (undergrad, non-target, middle of Tx) for the real estate dep. to see if they can help? Or should I use books, and the internet for this project?
Any advice, tips, constructive or destructive criticism is always enjoyed!
Thanks gents.
The number one most helpful thing you can do is get your hands on as many actual retail leases as you can, read through them, highlight any words or clauses you don't know or understand, and look them up. Then try to read through the lease with the perspective of the tenant, and identify any areas you think would concern you or expose you to risk. Then do the same but pretend you are the landlord.
I would also keep a running list of clauses/items addressed in the leases you read to try to get a handle on all the issues and items most retail leases cover. Nothing worse than proofing a lease and giving it the OK, only to be told by your superior that it lacks something as basic as a holding over clause or something similar.
I hadn't even thought about the idea of going through it with different perspectives, that is genius. Thank you
I was going to say the same thing. Google is your best friend here. Search for retail leases and type .pdf after your search in Google. This'll get you some results you'll like hopefully.
Make sure you understand key concepts such as co-tenancy clauses, percentage rent, lease types and how reimbursements (if any) work with each one, what kind of tenant improvements different types of retail tenants would demand, what a tenant "going dark" means, etc.
As others have mentioned, getting your hands on and reading actual leases is the best way to learn here. In different leases you will encounter the different variations of the points mentioned above (far from an exhaustive list btw) and the key here is to familiarize yourself with those and understand what they mean with the help of google, books etc. Sounds like you are determined and will do great, just hit those leases and get to reading.
Thank you, I just started a list of things to specifically look for when I go over a retail lease with a good family-friend from CBRE. I will add these details!
Also check out net lease advisor dot com. It doesn't have any copies of leases, but it does have information on all the major retail operators with a good list of pros and cons for each property. Like if the tenant typically does double or triple net leases and if they usually do franchised or corporate guarantees.
I think this would be a major resource I could utilize if I get the internship. Thank you!
As stated above, and above all else, understand reimbursement structures. That is; Net, Base Year Stop (+1) (-1) and how to calculate this to understand the mechanics, Fixed reimbursement (understand why this might be the case).
Understand how to calculate percentage rent (breakpoints, chargeable sales, etc..) which will make up a lot of the retail leases you model.
Know common anchors and in-lines of the firms target markets. Since it says you are from Texas (HEB is to TX as Publix is to Florida)
What were those books that they told you to read?
Investing Properties Structuring Partnerships Appreciation by Gary Rappaport (This is the one I have just begun to read)
Estate Investor Financial Measures by Gallinelli
Mastering Real Estate Investment Examples by Gallinelli
So not really retail oriented
Commercial Retail Leases and Outlot Purchases: A Practitioner's Guide to Forms and Provisions by Mark Dall and Noble C. Hatfield
I know this may be a bit late but I listened to this Podcast this morning regarding some common problems in retail leases and thought it may help... http://commercialrealestateshow.com/listen/february-22-woah-should-have…
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