Leasing Strategies

On this page:

Leasing Policy as Implementation Plan

Priority Uses & Excluded Uses

Prospecting and Qualifying Tenants

Defining the Lease Terms

Sources

 

Leasing Policy as Implementation Plan

Generally speaking, organizations define a leasing policy or a leasing strategy as the tool used to ensure organizational and community goals are met. As long as the document’s stipulations do not conflict with state law and are consistent with local land use restrictions and regulations and the lease is signed by both parties, then the organization has nearly endless creative discretion in crafting a lease to fit community and organizational needs.

Priority Uses & Excluded Uses in Leases

  • Priority Uses: the organization can determine its ‘ideal’ tenants that match the organization’s social and financial objectives. Priority uses can be enumerated in an internal strategic property plan, a neighborhood plan, a property-leasing policy, a city agreement or an agreement with an exclusive broker.
    • Examples: priority given to locally owned businesses or nonprofits providing a needed social service. Art Space artist lofts gives precedence to artists.
    • Accomplishing this goal: organizations can target their outreach and promotions to specific organizations/businesses.
  • Excluded uses: Strategy documents can list uses deemed inappropriate for the space, more than likely to be outlined in the leasing policy.
    • Examples of excluded uses are national franchises or gambling institutions.
    • Additional Use Restrictions: if the purpose of the project is to “create small business opportunities or jobs,” the organization “will probably not want to establish tight use restrictions.”

The organization should work closely with the community, existing businesses, and even local universities to identify those uses most needed or most conducive to the project’s goal. If the project goal includes providing employment to local residents, then potential uses should include a wide range. 

Prospecting and Qualifying Tenants

Once goals for the space have been defined with community input and feedback and general uses have been prioritized, organizations must prospect and qualify potential tenants or owners.

  • Prospecting: a strategy the organization might employ to recruit and identify prospective tenants.

This strategy represents an opportunity for the organization to work closely with members of the community, local nonprofits, city officials and workforce development organizations to help identify tenants that support the organization’s goals and objectives.

  • Qualification includes the screening and selection of tenants based on performance on a predetermined set of criteria.

A non-profit development with social goals should qualify tenants based on their performance against financial and social criteria within the neighborhood context. See <hyperlink> for financial and social criteria used to qualify potential tenants.

Defining the Lease Terms Rent Structure and Additional Requirements

Lease terms include rents paid, how tenants contribute to capital improvements, and what is to be done if a tenant’s financial position improves such that affordable rent is no longer a necessity.

  • Length of lease term: the term of the lease will depend on community needs, financial considerations, type of tenant, and tenant performance.

For example, the owner of the space can choose to establish long term leases for tenants providing crucial human services like the one negotiated between Champlain Housing Trust and a nonprofit community health center. If the organization is interested in incubating businesses, retail businesses could be granted low-rent leases to enable start-up development. However, the businesses undergo regular rent reviews to ascertain whether the business is capable of paying at or near market rate values. In other cases, the lessor may want to ensure that high performing tenants are benefits from the commercial space. Following the lead of Pike Place Market Preservation and Development Authority, the lessor can stipulate short-term leases with scheduled performance reviews. If the tenant is underperforming, then the lessor can terminate the relationship in favor of a higher performing tenant. Conditional on tenant performance, the lessor can also offer the first right of refusal to the existing tenant to ensure the highest bidder does not always get the space.

  • Alternative rent structures: Organizations can decide to set rents below market rate, or build in other subsidies like “reduced utilities costs, rent freezes, or lower base rents to compensate for higher CAM costs for security.”
  • Job creation and reporting requirements: It can be required of businesses to report job openings so that they are accessible to local community residents. The lease can make specific stipulations requiring the lessee to work with other organization to hire local workers.
  • Job training requirements: it can be required of businesses to receive technical service or attend business support classes

 

Sources:

Brown, Emily and Ted Raney. “Community Land Trusts and Commercial Properties: A Social Justice Committee Report for the Urban Land Institute Technical Assistance Program for Atlanta Land Trust Collaborative.” n.d. PDF File.

Kennedy, Maureen and Paul Leonard, “Dealing with Neighborhood Change: A Primer on Gentrification and Policy Choices.”

Community Land Use and Economic Group, LLC. “Retail development strategy for Rainier Valley.” 2009.PDF File.

John Turnbull, personal interview.

PDA Council & Committees.” Pike Place Market. n.d.  Web. 9 November 2014.

Winkler-Chin, Maiko, personal interview.

Yuen, Jeffrey and Greg Rosenberg. “Beyond Housing: National CLT Network Non -Residential Project Directory.”

The Pythian Development Will Offer Affordable Housing, Community -Oriented Commercial Space.” Crescent City Community Land Trust. 22 April 2014. Web. 10 November 2014.

Axel-Lute, Miriam, “CLTs Go Commercial.”

Monte, Michael, “Commercial Development at CHT.”

Advertisements