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TOPIC: Lease Terms

Lease Terms 23 Feb 2003 23:04 #28127

  • DrStinky
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Hello all. I have a question regarding commercial lease negotiations that I have not seen addressed in the forum or archives.

We own a single screen operation, but are currently negotiating a lease for a 4-screen theater facility. The triple net lease rates appear appropriate. However, the owner is requesting a personal guarantee on the 5-year lease term or a letter of credit backing up 6-12 months of lease in case of default.

I am uncomfortable on signing a personal guarantee for an extended duration, but the letter of credit is essentially a loan process, which can affect my operating leverage. What are everyone's thoughts regarding negotiating around these issues? Are there other options? I would appreciate any advice available.

Regards -

Steve Johnson
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Re: Lease Terms 24 Feb 2003 15:49 #28128

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Triple Net sucks, we don't pay it. We've looked at at least two deals where the rent was ok but the Triple Net sunk the deal.

A personal letter of Guarantee is standard issue in this industry. And it's worth the paper it's written on. A landlord usually can only go after you for about a year of the lease because he must have made a good faith effort to re-lease the property. Most courts will only grant one year. But we happily signed a personal guarantee for $1.5 million dollars. See why I say it is worth the paper it's written on, I wasn't even employed at the time.

We also signed personal guarantees with all the film companies as per their contracts as well. So let's just say, I'm committed.

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