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devorah_gw

Problem with tenant improvement loan?

19 years ago

My FIL own a small piece of commercial property that he leases to a multi=national corporation. I think he got hosed on the lease - 5 years, same rent every year. They also have an option for (2) five year extensions with a 3% raise each year.

Now they want some substantial improvements and are promising to pay extra rent for a 10 year period to cover the cost of the improvements + 9 1/2% interest - even though their lease only binds them for 5 years. The original lease looks pretty bad to me - no mention of venue, penalties in case of non-payment, binding arbitration or anything one would usually expect to find in a long term lease. If my FIL goes forward on this it will wipe out all of his liquid assets. I am not sure this is a good idea, but my FIL has dollar signs in his eyes. He thinks he is making out like a bandit. What do you think? Oh, and if he accepts, the tenant also wants an additional 5 year option for a total of 20 years tied up at no raises in rent for the first year and 3% per year for the following 15 if they want to - and nothing if they don't.

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