Fit Out Before Lease
The situation
The owner of a medical center has signed a 5+5-year lease with a new tenant with a starting rent of $18,000 per month. The owner needs to spend $250,000 on a new fit-out before the tenant moves in. The fit-out will take approximately three months to complete.
The property is already mortgaged, and the owner is unable to draw down additional funds from their existing facility or fund the works from other capital. The current monthly commitments are approximately $7,300.
PropPay solution
PropPay and the owner enter into a concurrent lease which sees the owner receive Rent in Advance of $250,000 when the concurrent lease is signed.
Once the fit-out is completed, the tenant moves in and starts paying rent from month 4. The concurrent lease will run for a further 31 months during which time PropPay has the right to collect the monthly rent from the tenant and must also pay the landlord a monthly rent of $9,935 from which is deducted a monthly Admin fee of $1,750. This leaves the landlord $8,185 per month for expenses and outgoings.
PropPay’s total Admin fee is $66,500 over the 34 months and is just 10.7% of the total rent from the property of $558,000.
The landlord has a new lease, their rent is being paid from day one, and the tenant has their rent-free period.
*Subject to approval. Terms and conditions apply. Differences due to rounding. Pricing is illustrative. Example assumes no rent increases over the term of the concurrent lease.
