Preparation Guide for Leasing Commercial Property
If you are looking to lease a warehouse, loft space, offices, or retail property, you should be well prepared. Commercial Real Estate inventory in Brooklyn and the other boroughs in NYC is low and it’s competitive. I prepared this guide to assist you on making your big move.
Are you ready to lease? The number one thing a landlord wants to know is “will the tenant pay the rent”. Therefore he will investigate your company to determine the risk he might be undertaking in leasing his property to your company.
You must be prepared to have information on hand to show the property owner that you are a good candidate to lease his property.
I break this down two categories of business situations.
Category A. You are an existing business with a financially sound track record.
Category B. You are a Start-Up, In business for under five years, business with lack of track record (ex. all cash business), or struggling business
If you fall under Category A. you’re in a great position to lease. Landlords love to have thriving exisiting businesses come into their building. Also commercial real estate agents would be thrilled to assist you anyway they can to help you find a space and probably won’t charge you a fee (every broker varies). Working with one broker has big advantages that includes saving you time, recieving real estate advise, and assistence in lease negotiations.
However to put yourself in the best bargaining position during lease negotiations, it is always best to have your financial documents ready when you submit your offer. It is even better if you submit some financial information with your offer to show that you are serious about leasing. Use the advise of you broker or attorney on kind of information you should disclose.
Information you might want to disclose can include
1) DUNS NUMBER or D&B NUMBER: submitting a DUNS number is great to give to a owner. It doesn’t reveal sensitive financial information but is a reliable source for the landlord to see your business credit history. If you don’t have a DUNS number you can visit the Dun and Bradstreet Website.
2) Two Years of latest Tax Returns
3) Six Months of Bank Statements
4) Recent Profit and Loss Statement from your accountant.
5) Contact information of your lawyer
6) Contact information of your current landlord.
7) Media information (press, website, brochures etc)
Even if your company is financially sound, it does not mean the landlord will automatically accept you. If you are expanding, the landlord will want to see that you are not biting off more then you can chew so having a business plan on hand wouldn’t be a bad idea. The landlord might also consider your business model (are you in an industry on the way down?) and if your type of business will negatively affect his building (loud noise, environmental, foot traffic etc). Be prepared to show the landlord your current locations. Even if you disclose all the information provided it does not guaranty the landlord will accept you as a tenant, provide additional guaranties for the lease, or that you won’t have to provide additional security.
PLEASE NOTE: IF YOU ARE PLANNING ON DOING EXTENSIVE CONSTRUCTION OR RENOVATION, THE LANDLORD MIGHT REQUIRE MORE INFORMATION. STAY TUNED FOR FUTURE BLOG POSTS WHERE I ADDRESS THAT SITUATION.
If you fall under Category B you should have ALL THE INFORMATION I MENTIONED IN CATEGORY A, if you are able to provide it. But you should be prepared to disclose information.
Additional Preperations for Category B
1) You should have your business plan ready.
2) You should be prepared to post six months security. Now you SHOULD NOT offer six months security to the landlord at the get go, but you should know you have the security on hand. A landlord can ask for more or less then six months. You should discuss with a real estate professional about how much security you should have on hand. But if you really want the space and you get rejected, then offering additional security is a great way for the landlord to consider you. Please also note that you might be able to negotiate in your lease contract to get a portion of that security refunded if you are a good tenant and pay on time after a certain set period of time.
3) If you want to save yourself having to pay additional security, a good way to do this is to find a financially sound company or person to guaranty the lease. This means that if your business was to fail, then this company or person will guaranty your obligations to fulfill the lease contract. The entity or person guarantying the lease should have ready to provide their financial information to the landlord.
4)If you are a new business it might be a good idea from the owner/s of the new business to supply a personal resume. For instance if you want to lease a warehouse in Gowanus to use for a boxing gym, if you have been a boxing trainer for the last 20 years working with a exclusive clientel, that would certainly show the landlord that you have experience in your new business.
5) Personal Tax Returns, Credit Scores, Bank Statements. If you are a new business and can’t show a track record, you can show the property owner that you are personally financially strong to assume the lease obligations.
6) Information on past businesses. If you have owned successful businesses in the past, it would be a great idea to supply the owner information on your past businesses.
If you are currently looking for space in the 5 boroughs you can always call me for advise, call Jon Brooks, agent at 5CRE 212-366-0407, email me at jb@5cre.com..
Disclaimer: Not all information above may be accurate. Please before you use any advise in this post or any other post in this blog, consult with a real estate professional and/or attorney.
