Help Me With Sign Pennsylvania Banking Letter Of Intent

Help me with industry sign banking nevada letter of intent

hey everyone excite you back for this week's edition of frequently asked questions for commercial real estate in today's video what i thought i'd do is talk about a document that's extremely important in commercial real estate and one that's used very regularly and that's actually known as a letter of intent now you may be thinking what exactly is this document well it's a non-binding document that lays out the terms you're willing to accept in a commercial lease agreement so let's say that you're going out there and looking at different uh leasing opportunities and you find one that you really think would be a good fit for you your commercial agent would draft up a document that would lay out the terms that you're willing to accept these may not be exactly what the asking terms are from the landlord and once you're once that document is created the letter of intent you would submit that to the landlord and they would either accept reject or you would modify the the terms until everyone agrees and then you would actually draft the actual lease agreement which is an actual binding document so today what i thought i'd do is lay out just a sample template of the least the lever intent to show you exactly some of the things that you need to consider as you're crafting your own so go ahead and share my screen all right so as you can see this is just a sample template that we use here uh in in in our brokerage again i'm not a lawyer uh so i don't want you to take this as legal advice or anything but again this is generally a non-binding document that just highlights the high level overview of what terms you may be willing to accept so as you can see you start off with the language of letter intent uh you specify the landlord uh which you could pull off the pva or your property valuation um of your particular city the tenant would be yourself and the premises would be the the place that you're interested in in leasing from there you'd probably want to specify the total square footage of the space and then the term that you'd like to pursue in this case this would be for a five year lease plus a free rent period and we'll dive into that a little bit later in the letter of intent but there are different concessions that landlords may be willing to offer you in particular if you are a financially solvent tenant um the the fifth thing you need to consider is your rental options now what an option is is it gives you the right to renew your lease for pre for a predetermined length of time for predetermined terms they're generally beneficial for tenants because it gives you the flexibility or puts you really in the driver's seat so let's say the market's doing really well and market rents have shot up through the roof you'd be able to renew your lease at a predetermined rate which in most situations may be uh maybe less than what the market rate is or if the economy is doing poorly and there's a lot of vacant property out there and a lot of landlords are offering pretty good incentives to to lease their space you can choose not to exercise your option and then go find opportunities that may be cheaper in a better area or whatever else so it just does put you in the driver's seat so considering a rental option would actually be quite a big benefit to a tenant sec next you'd have to specify what the intended use in is landlords want to make sure that your intended use is in line with what they're expecting they wouldn't necessarily um especially if you're in a multi-tenant center uh they may have exclusivity with other tenants meaning that you wouldn't be able to operate a let's say phone store if there's another phone store on site and they have exclusive use of being the only phone store on site so specifying what your intended use is gives the landlord an understanding of what to expect uh before they lease you the space next is the landlord's scheduled delivery date this obviously can fluctuate based on whether or not there's got to be repairs done to the space or in the any build out done that could obviously fluctuate uh in this case it would just be whatever you think would be appropriate for the landlord to deliver the property to next is the landlord improvements this this has to do with build outs or whatever else sometimes landlords are open to doing build outs or they'll offer something called a tenant improvement allowance which is an amount that they credit to you in order to help you build out the space um and this is where you would actually specify that that language that that says hey the landlord will do xyz uh for this particular space and we'll we'll be expecting the landlord to or we'll be expecting a landlord to provide uh three four dollars a square foot uh intended improvement allowance to be able to build out the space accordingly so that's that landlord warranties this just means that that we're we're just making sure that the landlord is going to provide the space in an appropriate way you know the roof is not leaking the plumbing's functioning correctly heating and air systems correct electrical system etc and that that's going to be maintained or or done so throughout the term rent commencement either starts the day that the landlord delivers you the property or sometime thereafter if you have either free rent or a baited rent or whatever else so in this case the commencement date would be two months after the landlord's delivery date because you would be asking for some sort of of concessions from the landlord and this is where you would say you know if you if you wanted some free rent or or partial rent you could specify the term that says hey we want two months free from the landlord upon the deliver upon the delivery date now what you want to do is make sure that the base rent is specified clearly so in this case it's a fifty thousand square foot space as you can see up here and it's going to be marketed or we're asking for six dollars a square foot in rent which would mean that the total yearly rent would be 300 per year at a monthly rate of 25 000 per month what the option rent specifies is if you were to exercise your five-year option that we specified up up top what's the rent gonna be in this case it would be seven dollars a square foot is what we're asking and the which would equal about three hundred fifty thousand dollars per year or roughly twenty nine thousand one hundred and sixty six dollars and sixty six cents per month uh it's usually good to specify that within the the letter of intent all right uh we'll kind of skip these two these are pretty self-explanatory and then additional operating expenses or something that we always include in our letters of intent because uh there are some times in particular if it's a multi-tenant center there will be some additional operating expenses known as common area maintenance uh which means that it's a general upkeep of the area uh that is partially shared by each of the tenants on site and also if it's a triple net lease you may be required to pay your pro rata share of taxes insurance etc which would be specified within this operating agreement but what one thing that we do obviously usually recommend our tenants our clients do is consider asking for some sort of cap on um on these operating expenses if possible if you have the if you have the leverage in order to do so it's it may be wise to consider offering requesting a cap because you don't know what these expenses are going to do over a period of time in particular if you have a long-term lease it's probably pretty likely that those expenses are going to continue to rise over time so if you can get a cap on those expenses at least you know that you can mitigate some of the risk of those costs getting out of control and then obviously you want to specify what the utilities who's responsible for utilities on site content liability surge and in particular with retail signage is extremely important so wanting to specify what you're able to have on site is going to be very important for your business and then this is more of the re the broker language to make sure that the broker is compensated accordingly and then at the end you would specify when does this expire because again you want to create a sense of urgency on the other side so if you specify saying hey we're going to submit this letter of intent and it's going to expire in five days three days or five days or whatever else at least they have a deadline in order to shoot for um as uh as they approach the landlord and you go through the process of trying to work out a lease agreement for this for this particular property so i hope that that was of help i'll be posting a link below that actually shares this document with you if you if you guys are interested in having it again if you're interested or looking to lease commercial property in the area here in the louisville metro area i'd be happy to help you do so my name is my name is rafael collaso and my my email is rafaela crossontegroup.com or you can reach me at or you can reach me at my cell phone at 502-536-7315 again if you like these videos feel free to like share and subscribe i love providing awesome engaging content that is related to commercial real estate so i hope you guys enjoy this video we'll see you guys next week see ya