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View Full Version : "Owner Will Demise to Suit Tenant" - A Bit Drastic, Surely?


Northern Piper
06-16-2007, 09:31 PM
So I saw this sign on a property to let a while ago and was a bit bemused by it: "Owner Will Demise to Suit Tenant". I didn't realised the commercial real estate market was that tight! :eek:

I gather that it means the landlord will make alterations to induce a tenant to sign. I don't do commercial leases, so I'm just curious - is that standard language?

descamisado
06-16-2007, 09:38 PM
I think they mean this (see halfway down the page): Mortgage by demise.

http://en.wikipedia.org/wiki/Mortgage

Neptunian Slug
06-17-2007, 03:11 AM
So I saw this sign on a property to let a while ago and was a bit bemused by it: "Owner Will Demise to Suit Tenant". I didn't realised the commercial real estate market was that tight! :eek:

I gather that it means the landlord will make alterations to induce a tenant to sign. I don't do commercial leases, so I'm just curious - is that standard language?

Yes it is standard language. Demising is putting up walls to separate tenants. If there is a 400,000 SF industrial building and a 150,000 SF user comes along, the landlord is saying that he will essentially create a 150,000 SF space for that tenant.

Northern Piper
06-17-2007, 10:45 AM
I think they mean this (see halfway down the page): Mortgage by demise.

http://en.wikipedia.org/wiki/MortgageI don't think that's right, for two reasons. First, the sign was referring to a landlord and a tenant. That's a lease relationship, not a mortgage relationship. Second, as in England, I think we've abolished that type of mortgage in Saskatchewan - only mortgages by way of charges are allowed.

Neptunian Slug, how broadly will it be interpreted? Moving walls is one example - what about re-painting? re-carpeting? other minor renos?

Rysto
06-17-2007, 11:56 AM
So it doesn't mean that if you tell your landlord to fuck off and die, he will?

Neptunian Slug
06-17-2007, 11:58 AM
Neptunian Slug, how broadly will it be interpreted? Moving walls is one example - what about re-painting? re-carpeting? other minor renos?


Demising is walls and creating the space.

I don't know what kind of building you have here. If you are talking about a new office or industrial space, its likely that the building is nothing more than a shell. The landlord wants someone in there and will create a space to suit. If they want some TI (tenant improvements), then that is certainly a negotiating point. The longer the lease and the bigger the space, the more TI dollars they can probably swing.

I also don't know where the building is. But to give LA Industrial property as an example. Right now the market is tight as can be thanks to all of the port trade and distribution needs. If I have a 100,000 SF space and I know I can get a 100,000 SF user with good lease terms, when you come in and ask for 35,000 SF, I'll tell you to stick it in your ear.

But in Kalamazoo, I would probably offer you a 35,000 SF space, six months free on a five year lease and a few bucks to build the thing out. I might even offer a night with my wife on a ten-year lease.

Polycarp
06-17-2007, 02:31 PM
So it's not a more formal way of making the claim, "We're dying for your business!"?? :D

Northern Piper
06-17-2007, 02:40 PM
It was a small cafeteria on the mezzanine level of an office tower. There were three or four different operators in there, but they kept going under. Finally, the owner of the building seems to have given up on the idea of a cafeteria. Now, it's some sort of office space. So would "demise" here mean the basic structural changes to turn it from a restaurant to an office area?

Neptunian Slug
06-17-2007, 03:22 PM
It was a small cafeteria on the mezzanine level of an office tower. There were three or four different operators in there, but they kept going under. Finally, the owner of the building seems to have given up on the idea of a cafeteria. Now, it's some sort of office space. So would "demise" here mean the basic structural changes to turn it from a restaurant to an office area?

Demising to suit is the act of creating the size and shape that the tenant wants. So I don't know what kind of structural changes you are asking for. I suppose that the landlord will cover making sure everything is sprinklered and wired it up for communications and everything. But if he has decided to go office, that may already be done.

Bottom line, if you go in and lease 5,000 SF of office, the landlord will demise the space (carve out 5,000 SF, throw up four walls, a drop ceiling and a door). If you want nice carpet, paint and pretty light fixtures, some of that could come out of your pocket and some may come back to you in the form of the aforementioned TI allowance.

Billdo
06-17-2007, 07:20 PM
Just to back up Neptunian Slug, demising is considered the physical separation of one leased space from another.

In New York commercial leasing, it means that the landlord will build a "demising wall" (which must be of a higher fire rating than a wall interior to a leased space) between the leased space and the rest of the floor/building. Other than putting up a demising wall (and maybe a door into the space), that would bell all that would be implied by "demise to suit" here. However, an allowance for tenant improvements and/or a free rent period is common in New York (other than short term leases and some subleases).

Northern Piper
06-18-2007, 08:55 PM
I might even offer a night with my wife on a ten-year lease. Seems an even more drastic business measure as dying to get business ! :D

Neptunian Slug
06-18-2007, 09:15 PM
Seems an even more drastic business measure as dying to get business ! :D

If you have a vacant building in a shit market like Kalamazoo, its that or turn the building over to your lender!

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