In this issue
- Owners & Tenants Must Have Insurance
- The Versatile Real Estate Option
- Shopping Centers – The New Town Center
- Percentage Lease And The Seasonal Business
Insurance coverage must be addressed by both landlords and commercial tenants.
For the everyday problems, a landlord must have the maximum coverage for the building and the tenant’s leases. The tenant must carry insurance with coverage that will protect his business. What if you have a small disaster that is easily repaired, but you lose a tenant because he was not covered for the damage inside the business?……(more)
An option on real estate is an extremely versatile investment tool that comes in a variety of forms that can be used for a variety of purposes. The primary use of the option is that it gives the optionee (the party holding the option) control over property (in the sense of the right to buy it) for very little cash. It gives the most leverage and conserves cash, both very desirable for investors. An option can be compared to (1) a contract of sale with a liquidated damage clause, (2) a sale with a nonrecourse purchase money mortgage, and (3) a lease containing an option to purchase…..(more)
New mall construction and the renovation of existing centers are becoming more mixed use, with hotels and office buildings being incorporated into the plans. Larger malls are providing more than just shopping. We are seeing more cultural attractions, medical clinics, health clubs, spas, and other facilities locating there. With the success of the huge mall/amusement centers throughout the country, the idea of combining amusement centers with shopping facilities is still very popular. Shopping centers are increasingly becoming “town centers”, which is what the original planners had in mind for these facilities in the beginning….(more)
The choice of the type of lease for commercial space leased by a retail business is usually a percentage lease, meaning that the rental amount is determined as a percentage of the gross receipts of the business. The investor-landlord, in effect, takes a stake in the success of the tenant’s business and shares its ups and downs. Whether it is a hardware store, a furniture store, an ice cream and confections store, a supermarket, or a variety store, the percentage rental will depend on the turnover of merchandise, the margin of profit, and the cost of operating the business. The method of calculating the amount of the percentage rent must be simple and as foolproof as possible. This will reduce the chance for arguments and disputes. Accordingly, rather than using net profit (a term replete with potential for disagreement) as the yardstick, the figure used is gross sales, gross receipts, or gross revenue. The term “gross sales” should be clearly defined as, for example; all sales made at or from the leased premises, whether for cash or credit, whether by the tenants or subtenants, minus refunds for returned merchandise and minus sales taxes. The tenant usually must calculate the gross sales figure and the landlord is allowed the right to examine the books and records which pertain to the gross sales figure…..(more)
