Commercial Leasing Made Easy #69171

Georgia REALTORS® partners with the Local Boards and ® REALTOR Firms to provide quality, affordable continuing education courses.

Commercial Leasing Made Easy (6-Hour CE Class) #69171

Sponsored by:

Georgia Association of REALTORS®, GREC School #271 Partners in Education Program

Visit the Georgia REALTORS® website to learn about membership benefits, continuing education opportunities, networking events, and more!

(www.garealtor.com)

NOTICE: The following material is copyrighted and is provided to you for one-time use only in this GAR-sponsored course. You may not reproduce or redistribute any portion of this packet without the express written permission from the GAR Professional Development Department.

2018

STUDENT NOTICE

The Georgia Association of REALTORS®, Inc. is approved by the Georgia Real Estate Commission (GREC) to offer continuing education, sales postlicense, and broker prelicense courses. The GREC school code number is 271 with a renewal date of December 31, 2019.

The Georgia Real Estate Commission has approved this course for six (6) hours of continuing education credit. GAR school policy defines an instructional hour as 50 minutes.

To receive continuing education (CE) credit for this in-classroom course, the student must:  be on time  sign in with the course facilitator before the course begins  be present in the course during all instruction periods  return a completed evaluation to facilitator at the end of course  not have taken this course for continuing education credit within the past 366 days.

There is no make-up session for this course.

Cell phones and other electronic devices can be distracting. Use of communication methods such as text messaging, E-mailing, web surfing, etc. is prohibited while class is in session if it poses a distraction to other attendees and shall be grounds for dismissal. Taking pictures of PowerPoint slides requires the permission of the instructor.

Entrance qualifications and standards of completion will not be based on race, color, sex, religion, national origin, familial status, handicap, sexual orientation, or gender identity.

No recruiting for employment opportunities for any real estate brokerage firm is allowed during this course or on the premises while this course is in session. Any effort to recruit by anyone should be promptly reported to the Director of Professional Development; Georgia Association of REALTORS®; 770-451-1831; 6065 Barfield Road; Sandy Springs, GA 30328; or to the Georgia Real Estate Commission; 404-656-3916; International Tower; 229 Peachtree Street, NW; Suite 1000; Atlanta, GA 30303-1605.

10-2016 12/14/2017

Disclaimer: This class material is for informational purposes only. It is not intended to make you an expert in any of the subject matter covered.

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The lease is a contract in which:

} Tenant agrees to pay rent for a period of time

} Tenant agrees to abide by conditions of the lease

} Landlord agrees to allow the tenant’s business

} Landlord may agree to tenant improvements or amenities

PROPERTY LEASING MANAGMENT

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Types of Types of Rents & Lease Agreements UnitsUnitsUnits Leases FeesFeesFees Options 10 10 10 10 10

20 20 20 20 20

30 30 30 30 30

40 40 40 40 40

Commercial space or building that is completely built out including being configured with interior walls and with flooring and paint.

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A building or space in a commercial building with an unfinished interior and lacking heating, ventilation, and air conditioning

A commercial building with a minimally finished interior, usually with ceilings, lighting, plumbing, and some type of heating/cooling.

Areas that are available for use by one or more persons or tenants either inside or outside the building.

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Tenant pays a fixed (base) rent and the Landlord pays all other expenses associated with the property

Tenant pays a minimum base rental amount, plus a percentage of their gross sales over a predetermined threshold

This type of rent requires changes in rental payments based on a published index, such as the consumer price index.

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Tenant pays fixed rent plus a pro-rata share of property costs.

Fees paid for property maintenance, insurance and real estate taxes

Customized alternations a building owner or tenant makes to a rental space in order to configure it for the needs of a particular tenant

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Additional rent , charged on top of base rent mainly composed of maintenance fees for work performed on the common areas of the property.

A landlord may offer to reduce the rent for a time period or temporarily offer free rent.

Opportunity to lease additional space in the property after a certain period of time

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The right to extend a lease under specified conditions

When a lessee signs all of the leased property to another party for the remaining portion of time the property is leased.

When a tenant remains in possession of the property after the expiration of the lease

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An agreement that allows the broker to solely represent a property for lease and may or may not also allow for management of the property.

Landlord may have this type of an agreement with several brokers.

An agreement used that specifies a particular property and a specific tenant.

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An agreement that allows the broker to represent the tenant.

Before showing any property you should have your agreement in ______.

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New Tenant Relocating Tenant

} Who? } Why? } What? } Benefit? } Where? } Pros? } Cons? } When? } Configuration and } How much? size? } How big?

} Current zoning & allowable uses

} Location, location, location! } Property-specific features

1.1.1. Square Footage X $ Per Square Foot = Annual Rent

2.2.2. Annual Rent / 12 = Monthly Rent

3.3.3. Monthly Rent X 36 = Total Rent Over 3 Years

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______X ______= ______1500 X $11= $16,500

______/ ______= ______$16,500/12 = $1,375

______X ______= ______$1,375 X 36 = $49,500

1.1.1. Monthly Rent X Months = Annual Rent

2.2.2. Annual Rent / Square Footage = Rent Per Square Foot

______X ______= ______$1400 X 12 = $16,800

______/ ______= ______$16,800 / 1500 = $11.20 PSF

1.1.1. Square Footage X $ PSF Base Rent= Annual RentRentRent

2.2.2. Annual Rent / 12 = Monthly Rent

3.3.3. Square Footage X $ PSF NNN = Annual NNN FeesFeesFees

4.4.4. Annual NNN Fees / 12 = Monthly NNN

5.5.5. Monthly Base Rent + Monthly NNN = Total Monthly Rent

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______X ______= ______1500 X $10 = $15,000 ______/ _____ = ______$15,000 / 12 = $1,250 ______X ______= ______1500 X $1.50 = $2,250 ______/ _____ = ______$2,250 / 12 = $187.50 ______+ ______= ______$1,250 + $187.50 = $1,437.50

1.1.1. Annual Rent / Sales Percentage = Sales Threshold

2.2.2. Store Sales –––Threshold = Threshold Exceeded

3.3.3. Exceeded Threshold Amount X Sales Percentage = Additional Rent

4.4.4. Annual Rent + Additional Rent = Total Annual Rent

______/ ______= ______$50,000 / 0.04 = 1.25 MILLION ______– ______= ______1.65 MILLION – 1.25 MILLION = $400,000 ______X ______= ______$400,000 X 0.04 = $16,000 ______+ ______= ______$50,000 + $16,000 = $66,000

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1.1.1. Rent PSF X Square Footage = Annual Rent

2.2.2. Annual Rent / Months = Monthly Rent

3.3.3. $TIA Amortized by Years and Rate = TIA Per Month

4.4.4. Rent + TIA = Total Monthly Rent

TenantTenantTenantLandlordLandlordLandlord

RequiredRequiredRequiredrentrentrent $12.00$12.00$12.00$12.00$12.00$12.00 SquareSquareSquarefootagefootagefootage xxx 150015001500 xxx 150015001500 AnnualAnnualAnnualnetnetnet rentrentrent $18,000$18,000$18,000 $18,000$18,000$18,000 MonthsMonthsMonths÷÷÷ $12$12$12 ÷÷÷ $12$12$12

MonthlyMonthlyMonthlyrentrentrent $1,500.00 $1,500.00

AmortAmortAmort.Amort ...improvement costscostscosts $0.00$0.00$0.00 +++ $89.91$89.91$89.91

RentRentRentdueduedue fromfromfrom tenanttenanttenant $1,500.00 $1,589.91

1.1.1. Annual Rent / Square Footage = $ PSF

2.2.2. $TIA Amortized By Years and Rate = TIA per Month

3.3.3. TIA X Months/ Square Footage = TIA PSF

4.4.4. Rent PSF + TIA PSF = Total Rent PSF x Square footage = Total Annual Rent

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______/ ______= $ ______$120,000 / 10,000 SF = $12.00 PSF

$______[[AmoratizedAmoratizedAmoratized]] = $______$300,000 [5 YrsYrsYrs@ 8%] = $6,082.92 TIA Per Mo

______X ______/ ______= $______$6,082.92 X 12 MosMosMos/ 10,000 SF = $7.30 PSF TIA

______+ ______= ______X ______= ______$12.00 PSF + $7.30 PSF = $19.30 PSF X 10,000 Sf = $193,000 Per YrYrYr

} Pocket Listing } Exclusive Lease Listing Agreement } Commercial Exclusive Leasing/Management Agreement } Commercial Open Listing Agreement } Authorization to Show Unlisted Property } Exclusive Tenant Brokerage Agreement } Confidentiality and Non-Disclosure Agreement

} Commission to be paid is determined: ◦ As an amount per square foot ◦ Based on the value of the lease (percentage) ◦ Based on the value of the lease, capped ◦ A combination or variation of these

} Commission may be paid out: ◦ As a “cash out” ◦ “Term”

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Value Of Lease

$______X ______= $______PER YEAR X 5 YEARS = $______

$15.50 X 2500 = $38,750 PER YR X 5 = $193,750

Cash Out Commission:

Value Of Lease X ___% = $______

$193,750 X 5% = $9,687.50

Term Commission: Monthly: ______X _____ / ____ = _____ X ____% = $______$15.50 X 2500/12 = $3,229.17 X 7% = $226.04/Mo

Quarterly: ______X _____ / ____ = _____ X ____% = $______$15.50 X 2500/4 = $9,687.50 X 7% = $678.13/Quarter

Annually: ______X _____ / ____ = _____ X ____% = $______$15.50 X 2500 - $38,750 X 7% = $2,712.50/YEAR

GROSS COMMISSION: ______/year x ______years = $Total $2,712.50 X 5 =$13,562.40

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PROSPROSPROSCONSCONSCONS CASH OUT Paid Quickly Less Overall Commission More Likely To Get Less Risk Of Partial Full Payment Payment Transaction Client Longevity Completed TERM More Gross Paid Over Time Commission Client Longevity Risk Of Partial Payment Administrative Work

} Rule 1: There are no standard leases

} Rule 2: The terms of a lease favor the landlord

} Rule 3: There is ALWAYS room to negotiate

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} Parties

} Premises

} Term

} Rent Structure ◦ Full Service/Gross Lease ◦ Modified Gross/Modified Net Lease ◦ Triple Net

} Rent Increases } Rent Incentives } Pre-payment of Rent/Deposits

} Occupancy & Use

} Signage

} Parking

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} Compliance with Laws, Rules, & Regulations

} Warranty of Possession

} Entry & Inspection/Right of Acccess

} Assignment & Sublease

} Termination/Holdover

} Deed Restrictions, Restrictive Covenants & Trade Restrictions ◦ Deed Restrictions ◦ Restrictive Covenants ◦ Trade Restrictions

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} Tenant & Landlord Responsibilities

} Acquisitions & Mergers

} Miscellaneous

◦ Notices

◦ Abandonment/Vacation of Premises

◦ Subordination, Non-disturbance, & Attornment

◦ Estoppel

◦ Destruction of Premises/Risk of Loss

} Miscellaneous

◦ Condemnation

◦ Dispute Resolution/Attorney Fees

◦ Radon Gas

◦ Disclaimer/Indemnification

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} Miscellaneous

◦ Agency & Brokerage

◦ Attorney’s Fees and Costs

◦ Entire Agreement

◦ Guarantee

} Signature Block

} Length of Lease & Renewal Options

} Rent and Rent Increases

} Tenant Improvements

} Subleases & Assignments

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} Corporate Entity

} Renewal Options

} Assignment Rights

} Tenant Inducements

} Signage

} Parking

} Exclusives/Non-Competes

} Holdover

} Radius Restrictions

} Demolition Clauses

} Default Clauses

} Relocation Clauses

} Limitations on Use

} Who Pays

22 Georgia Association REALTORS® Partners in Education Student Course / Instructor Evaluation Course Name ______Instructor ______Date ______

PLEASE FILL IN THE BUBBLES COMPLETELY SO ANSWERS ARE SCANABLE. Please do NOT use check marks, x's or any other type of mark. The instructor encouraged my participation through questions and answers or exercises. Strongly Disagree Disagree Neutral Agree Strongly Agree

The instructor presented ideas clearly and made the subject matter interesting. Strongly Disagree Disagree Neutral Agree Strongly Agree

The use of the outline / handouts for study and / or reference was helpful. Strongly Disagree Disagree Neutral Agree Strongly Agree

The topic is relevant / helpful to my real estate activities. Strongly Disagree Disagree Neutral Agree Strongly Agree

I would want this instructor back. Strongly Disagree Disagree Neutral Agree Strongly Agree

Additional Comments:

Thank you for your input. (Revised 52017)