You and Sally agreed to develop a negotiation plan, mapping out a strategy to purchase the Boca Raton property to establish the restaurant. After reviewing the market plan and the terms
You and Sally agreed to develop a negotiation plan, mapping out a strategy to purchase the Boca Raton property to establish the restaurant. After reviewing the market plan and the terms of the proposed agreement, you suggest to Sally that it would be great if the two of you could map out the areas you believe could be negotiated with the owner. The plan would provide you with a prioritized list of issues to facilitate an agreement with the owner. Sally tells you that she has a perfect tool for plan development. Sally has emailed you a copy of the mapping tools and asks if you would take a shot at filling it out. Compare your term sheet information and the owner's positions listed in the Marketing Study for the property in Boca Raton (PDF). In the negotiation matrix, map out the issues that you and the owner expressed in the marketing study.
You told Sally that you were going for a win-win in the negotiations. She recommended that you review the article below to learn the language needed to make winning arguments.
Read the following:
5 Win-Win Negotiation Strategies (Harvard).
https://www.pon.harvard.edu/daily/win-win-daily/5-win-win-negotiation-strategies/
Review the marketing information and the seller's position concerning the property and priorities.
Complete and upload the Term Sheet (DOCX) answering the issues presented and include your principle objectives in the forms.
Read the Contract Negotiation Process (PDF).
Review this video:
Orange Example/Negotiation by Design (YouTube/7:46)
Upload the following documents:
The Learning Canvas Matrix
The Term Sheet
REAL ESTATE SALE CASE STUDY
Background
SALES INFORMATION
Property Location:
1424-1450 N FEDERAL HWY,
BOCA RATON, FL 33432
Price $5,990,000
Sale Type Investment
Cap Rate 7.01%
Sale Conditions Lease Option
Property Type Retail
Property Sub-type Restaurant
Less
General Retail Freestanding
General Retail Storefront Retail/Office
Office Medical
Building Class C
Lot Size 1.36 AC
Gross Leasable Area 7,615 SF
No. Stories 1
Year Built 1970
Tenancy Single
Parking Ratio 10/1,000 SF
Zoning Description B4
APN / Parcel ID 06-43-47-20-15-001-
0011
Date Created 5/29/2019
ID#: 16181065 Last
Updated: 6/18/2019
DESCRIPTION
Total 7615 Sq. Feet 6,000 Square foot Under Air, with a 1,615 square foot Outdoor Covered Patio and deck for outside dining.
HIGHLIGHTS
Local 24-Hour always open 30 year old diner chain currently in three locations
Walking distance to Downtown and Mizner Park and the Museum. Additionally, the IPIC Theater is just within half mile
Property can seat 259 combined inside and outside, 93 Parking spaces and a covered patio seating with a full bar and wine case set up
Located on the FAU (Florida Atlantic University) corridor on Federal Hwy just north of Glades Road with a B-4 Zoning
Current tenant in building is relocating by August 31st, 2019 meaning this is a wonderful owner/user OR investment opportunity
Strategically positioned along heavily trafficked North Federal Highway with a Vehicle Per Day count of over 34,000 cars
SALE NOTES
Free-Standing Restaurant Building, For SALE at $5,995,000 OR NNN Lease for $35,000
monthly, plus $4,200 in property taxes monthly Current Tenant Relocating by July 2019 or
August 2019. The property is offered for Sale or Lease By the Owner. Half A Mile North of
Mizner Park, Boca Downtown Museum, and IPIC Theater. Free Standing Luxury Building
recently renovated in 2013, In and Out. The current tenant operates 7 Days a Week, 24 Hours.
Tenant scheduled to vacate in July or August of this year, per request. Exterior covered Patio
and partially uncovered with Fire torches and Water Fountain. Full Bar and Wine Cabinet
Display area. Dining room Kitchen with Hood, separate Chef's Kitchen with Hood and Main Line
Kitchen with On Demand Hood.
Brokers Representation of Property owners position
1) The Owners position: What do they want? Why?
The Seller would like to capitalize on his most profitable real estate holdings. Selling the
property at maximum return is the Owner's ultimate goal, and she realizes that the age
of the building is eventually going to present problems in any future sale, even though
the building was recently completely renovated. The building owners' interest is to sell,
preferably within the next two months, before or on the date of the current lease
terminates. If not, the Owner's carrying cost increases since the building may go vacant
until she identifies a new leaseholder. A sale solves all of the Owner's issues because
the price includes the Amortization of the building renovation costs in the asking price,
including a six-month lease recovery premium in the event the building was to remain
vacant until a sale. The Broker has stated that that the Owner would consider a lease
arrangement either a straight term or a Triple Net lease. There is also the option for any
variation such as a Net or Net-Net Lease with terms such as taxes, utilities,
Amortization of the renovation costs, and rent-plus percentage based on Gross income
from the Restaurant.
The property owner believes that the property fits well within Sally's plan to establish a
new Restaurant. Great location, floor setup, lots of parking. The current tenant has had
an exceptional long-term reputation in the area, and the customer base should help
establish and carry over to the new Restaurant.
The though is that If the purchase price is too top-heavy, maybe they will consider the
NNN Lease options. There may be some room for negotiation on the purchase price,
but that depends on Sally's costs model. There may be a slight margin based on the
carryover of the tenant or discounting the lease price if Sally assumes the final lease
period any holdover pass the lease period. Also, the cleanout costs are high, and
maybe if there was an assumption of that responsibility, there could be adjustments
made.
An assumption probably would make sense if Sally wants to get in early to renovate to
the floor plan and set up the kitchen and dining floor and start ordering and stocking
foodstuff.
The Owner believes that his walk-away alternative is that he will not go over a 20%
discount on all pricing terms. He is willing to carry the property until a buyer comes
along within, at least the end of the current tenant lease expires.
The Owner will discount the price of the sale by as much 30% net thirty-days if offered a
cash buyout and not have to wait for financing to take place.
The Owner realizes that the best solutions for both parties would be to reach a
reasonable price reduction with incentives to close early and turn lease period revenue
over to the buyer.
FINANCIAL SUMMARY (PRO FORMA – 2019)
Gross Rental Income
Annual $420,000
Annual Per SF 55.15
Other Income
Annual –
Annual Per SF –
Vacancy Loss
Annual –
Annual Per SF –
Effective Gross Income
Annual $420,000
Effective Gross Income
Annual Per SF 55.15
Net Operating Income
Annual –
Annual Per SF –
DEMOGRAPHICS
[1 Mile /]
HOUSEHOLD INCOME
$0K – $35K 32% $35K – $75K 34.4% $75K – $100K 10.2% $100K+23.4%
Income Thousand
$0K – $35K 1,775
$35K – $75K 1,910
$75K – $100K 564
$100K+ 1,299
$96,376
Average
AGE DISTRIBUTION
0 – 1920.1%20 – 2913.6%30 – 3914.8%40 – 4912.4%50 – 6420.8%65+18.4%
Age Year
0 – 19 2,869
20 – 29 1,934
30 – 39 2,113
40 – 49 1,763
50 – 64 2,962
65+ 2,618
41.4
Average
TRADE AREAS
1 mi 3 mi 5 mi
[15 Min Drive /]
Total Population
1 Mile 14,259
3 Mile 74,783
5 Mile 177,827
2010 Population
1 Mile 9,942
3 Mile 57,482
5 Mile 153,525
2024 Population
1 Mile 15,710
3 Mile 81,307
5 Mile 190,006
Employees
1 Mile 15,760
3 Mile 84,516
5 Mile 171,639
Total Businesses
1 Mile 2,191
3 Mile 8,493
5 Mile 15,527
Average Household Income
1 Mile $96,376
3 Mile $110,391
5 Mile $98,696
Median Household Income
1 Mile $59,231
3 Mile $74,611
5 Mile $65,969
Total Consumer Spending
1 Mile $163.57M
3 Mile $936.46M
5 Mile $2.2B
Median Age
1 Mile 41.2
3 Mile 47.1
5 Mile 48.7
Households
1 Mile 6,325
3 Mile 32,447
5 Mile 81,325
Percent College Degree or Above
1 Mile 25%
3 Mile 27%
5 Mile 26%
Average Housing Unit Value
1 Mile $498,302
3 Mile $547,651
5 Mile $460,971
MAJOR TENANT INFORMATION
FLASHBACK DINER
SF Occupied 7,615
Lease End Date July 2019
AMENITIES
Signage Monument Signage
TRAFFIC
Collection Street: N Federal Hwy
Cross Street NE 15th Ter, SW
Traffic Vol 34,622
Year 2018
Distance 0.14 mi
Collection Street: NE 5th Ave
Cross Street NE 16th St, N
Traffic Vol 6,578
Year 2018
Distance 0.18 mi
Collection Street: Glades Rd
Cross Street N Federal Hwy, E
Traffic Vol 22,699
Year 2018
Distance 0.24 mi
Collection Street: Glades Rd
Cross Street N Federal Hwy, E
Traffic Vol 22,744
Year 2018
Distance 0.28 mi
Collection Street: NE 20th St
Cross Street NE 4th Way, NE
Traffic Vol 15,308
Year 2018
Distance 0.28 mi
PUBLIC TRANSPORTATION
COMMUTER RAIL
Boca Raton Commuter Rail (Tri-County
Commuter)
Drive 9 min
Distance 4.1 mi
Deerfield Beach Commuter Rail (Tri-County
Commuter)
Drive 13 min
Distance 5.5 mi
AIRPORT
Palm Beach International Airport
Drive 37 min
Distance 25.7 mi
Fort Lauderdale–Hollywood International
Airport
Drive 38 min
Distance 26.7 mi
WALK SCORE ®
85
Very Walkable
TRANSIT SCORE ®
,
Term Sheet
The Importance of Developing a Term Sheet
A Term Sheet usually is an unenforceable expression of intent but a valuable tool in negotiating a favorable property sales agreement or lease. A Term Sheet emphasizes critical elements in negotiating a sales agreement or lease. Once the landlord submits the sales agreement or lease offer in writing, compare all offers you receive. In negotiating term sheets, it is essential to set limits. If you need expansion or renewal options, be sure your prospective landlord or property owner addresses your concerns in their term sheet. Although not binding, the Term Sheet request may result in the owner retracting the offer. However, the Term Sheet is a valuable negotiating tool because it clarifies the deal. A Property owner can face a dilemma if there is a missed opportunity to close because of their resistance to negotiate. The owner’s ability to turn over space can be adversely affected by the long-term closing prospects if the owner gains a reputation for retracting or renegotiating term sheets.
Time Investment in Negotiating a Real Estate or Lease Agreement
There is a mistaken belief that the deal is done after negotiating an agreed-upon Term Sheet. A well-negotiated term sheet can certainly streamline the process, but a term sheet cannot address all of the legal issues that arise under a purchase agreement or a lease. The Term Sheet lacks specificity and often results in ambiguities that only a negotiated purchase agreement or a lease agreement can determine.
The below forms include questions that must be answered in completing your Term Sheet. Detailed responses provide critical information required for several assignments that employ this Term Sheet. Incomplete sentences, short responses, or forms containing white space will not be graded.
FORM 1
|
Term Sheet |
||
|
ISSUES |
YOU |
OWNER |
|
DESIRED OUTCOME: What’s the want? Do you need to learn more? Why? What do the parties value? |
||
|
KEY INTERESTS: What do the parties want? What alternatives are available if no deal is reached? |
||
|
WHAT ARE THE WALKAWAY ALTERNATIVES: What do you or the other side lose if no deal is struck? Why? What options do you have, if they disagree with your terms? |
||
|
BARGAINING CHIPS: What do you have to offer that the other party values? |
||
|
POSSIBLE SOLUTIONS: What solutions could work for both parties? List solutions that will overcome any disagreement during the negotiations. |
||
|
AGREEMENT: List the items that both sides should have no difficulty agreeing with. |
FORM 2
Key Objectives and Considerations in the Real Estate Purchase or Lease Agreement
|
Key Objectives: |
Property Owner: |
Restaurant owners: |
Considerations: |
|
Identify the advantages and disadvantages of buying the Property |
Advantages: Disadvantages: |
Advantages: Disadvantages: |
Purchase less risky than Leasing because? High purchase costs? Is buying a property the best option for you? Outright sale – buying a property in full. Ownership is transferred immediately. Payment is expected right away |
|
Identify the advantages and disadvantages of Leasing the Property |
Advantages: Disadvantages: |
Advantages: Disadvantages: |
What are the: 1. Reduced startup costs? 2. Immediate cash flow? 3. Added inventory cost? |
|
Identify the advantages and disadvantages of Leasing the Property under the various Leasing Terms offered (Term Lease, N, NN, NNN) |
Advantages: Disadvantages: |
Advantages: Disadvantages: |
Existing problems: Which deal (Sale or lease) do you think the owner prefers? Why? Is there a potential for a Gradual Sale through Leasing? What would be the terms? Are there flexible options for transferring Property that benefit an individual who cannot afford to purchase outright but can finance a long-term payment plan? Explain. Lease Agreement – requires a commitment to a contract that details the conditions and payments you will make for temporary rights to the business. |
|
Identify the resources available to assist in buying the Property |
Estimate the timeframe and costs required before the Restaurant generates a cash flow. If the transition starts before the deal is complete, what financial impact will it have on your cost structure? List the items impacted. |
Table 1
|
Benefits of a Term Sheet Agreed to by Landlord and Tenant |
|
|
Loss opportunity Cost |
Cost of Loss money |
|
1. Unpaid or late rent |
1. Security deposit forfeited |
|
2. Search for better replacement Tenant |
2. Damaged or bad credit |
|
3. Paying Tenant’s delinquent utility bills |
3. Unable to find a new business location |
|
4. Unexpected shared costs |
|
|
Unexpected repairs to the Property |
Unclear maintenance obligations |
|
4. Permanent damage 5. Unnecessary replacements |
5. Losing customers because common areas not maintained |
|
Expensive lawyer fees to |
Property damage caused by |
|
6. Help with an eviction notice 7. Seek remedies for unlawful use of the premises 8. Clean up hazardous materials 9. Remove unpermitted liens on the Property |
6. Unsecured premises 7. Poor security of entryways 8. Other tenants businesses 9. Landlord’s failure to repair 10. Improper janitorial services 11. Burst pipes during the winter |
|
Mental anguish of |
Mental anguish of |
|
10. Illegal business activities taking place on your Property 11. Responding to complaints from neighboring tenants 12. Not being a “named insured” on tenant’s insurance policy |
12. Being unexpectedly evicted 13. Not placing an advertising sign of your choice outside 14. Unfair competition from other businesses despite promises to be the exclusive store |
Table 2
|
Purchase Lease Agreement Issues |
|
Adjusted Purchase Price: Includes prorated items such as rent, utilities, and inventory up to the time of closing. |
|
Review of required Documents: The documents you need to review include a corporate resolution approving the sale, evidence that the corporation is in good standing, or any tax release that the seller may have promised. You may check with your local department of corporations, state corporation commission, or Secretary of State for more information. Collepals.com Plagiarism Free Papers Are you looking for custom essay writing service or even dissertation writing services? Just request for our write my paper service, and we'll match you with the best essay writer in your subject! With an exceptional team of professional academic experts in a wide range of subjects, we can guarantee you an unrivaled quality of custom-written papers. Get ZERO PLAGIARISM, HUMAN WRITTEN ESSAYS Why Hire Collepals.com writers to do your paper? Quality- We are experienced and have access to ample research materials. We write plagiarism Free Content Confidential- We never share or sell your personal information to third parties. Support-Chat with us today! We are always waiting to answer all your questions.  Related Posts
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