Sunday, January 20th, 2019 January20th2019

Sell for More Trivia: What is a RFP?

Published on January 20th, 2019

Sell for More Trivia is a weekly blog series that playfully presents a trivia question about commercial real estate.

 

RFP stands for Request for Proposal.  This document is used most often in the commercial lease process.

Given the amount of time and resources necessary to find a new space, this tool will streamline the process for both the tenant and landlord.

To that point, tenants should always submit a RFP to landlords when they’re in the market for leased space.  That way, the tenant will be able to compare apples to apples during the subsequent lease negotiations.  I also think most landlords appreciate receiving them because it shines light on the tenant’s key deal points.  In summary, a RFP will save the tenant and landlord time and effort.

Now let’s quickly walk through this process.  A tenant must first decide its exact requirements (or at least a range that would be acceptable).  It would then submit a RFP to the landlord that looks something like this:

Dear Landlord Name:

Prowess IRES has been hired by Tenant Name (“Tenant”) to evaluate facility options in Nashville, TN and surrounding areas. Tenant has toured the market and your building has been selected as a potential new location. Please respond to the tenant’s criteria for desired terms, conditions, and features to allow for an effective evaluation of all potential locations.  Please address your response in the format outlined below:

Building Name & Address:
123 Elm Street, Nashville, TN

Year Built & Renovated:
Landlord to respond

Building Ownership:
Landlord to respond

Building Management:
Landlord to respond

Total Building Size & Number of Floors:
Landlord to respond

Tenant:
Tenant Name

Square Feet / Premises:
4500 SF

Provide suite number(s):
Landlord to respond

Lease Commencement:
December 1, 2019

Early Access:
Tenant shall have access into the premises 30 days prior to Lease Commencement, at no charge, for move in and set up, including furniture, phone and data wiring.

Lease Term:
Seven (7) years

Use:
General Office

Rental Rate:
Please provide a competitive rental rate to include a turn-key buildout outlined below.

Operating Expenses/Taxes:
Please indicate which expenses are included in the quoted rental rate. Please provide a breakout of the current real estate taxes and operating expenses for the building, as well as a history stating the past two (2) years expenses. If the rental rate is calculated on a full service gross or modified gross basis, include the estimated the base year. If the Building is less than fully occupied, the operating expenses will be adjusted so that the expenses will represent that of a building 95% occupied.

Utilities:
Please provide any additional costs outside of rental rate and operating expenses that will be Tenants responsibility as well as hours of operation for HVAC.

Janitorial:
Tenant responsibility.

Free Rent:
Please provide any free rent incentives Landlord is prepared to offer Tenant.

Tenant Improvements:
Landlord to provide a turn-key buildout for Tenant with the following specifications. (Final specs and space plan to be agreed upon to prior to lease signing.)

• Paint: Color 7686 Hinocki on all walls
• Carpet: Color 49320 Rolling Hills
• Floor molding: 130 Sisal
• Damaged ceiling tile replaced at landlord expense
• Vents and ducts cleaned at landlord expense
• Window seals and locks in good working order at landlord expense
• Entry locks keyed and in good working order

Space Planning:
Please provide the Tenant with space plan and test fit per above TI requirements. Tenant has provided current furniture dimensions (attached hereto as Exhibit A). Please incorporate existing furniture into space plan. All costs associated with said space planning shall be the responsibility of the Landlord and shall not be included in the Tenant Improvement Allowance.

Construction Procedure:
Please state the name of the company the Landlord typically uses or plans to use to construct the tenant improvements. Landlord and Tenant shall work together on the bidding process, which shall be done with an open book policy. The bid shall be awarded to the best contractor with the ability to best perform all the work required in a timely manner and at the most competitive price. The Landlord shall not add management fee or any other additional costs beyond the bid provided by the contractor(s).

Moving Allowance:
Please provide any moving allowance incentive Landlord is prepared to offer Tenant.

Right of First Refusal:
The Tenant shall have a continuous Right of First Refusal on any contiguous space.

Renewal Option(s):
Tenant shall have the right to one (1) five (5) year renewal option at 90% of the then current market rental rate.

Access 24/7/365:
Please confirm the Tenant’s employees and staff shall have access into the Building and Premises 24/7/365.

Signage Rights:
Landlord to respond

Building Security / Building Hours:
Landlord to respond

Parking:
Please provide information (including pricing, if applicable) on Tenant parking options for 7-8 employees.

Lease Securitization:
Tenant shall not be required to make security deposit.

Brokerage:
All parties acknowledge the involvement of Prowess IRES as the Tenant’s broker and sole representative and agree that the Landlord is responsible for payment of all real estate commissions due to Prowess IRES as a result of this transaction at a rate of four percent (4%) of the total gross lease value over the term of the lease. The Landlord and/or Landlord’s representative and Prowess IRES shall enter into a separate agreement outlining the terms of payment, which shall be executed prior to lease execution.

Non-binding:
This proposal is not intended as, and does not constitute, a binding agreement by any party, nor an agreement by any party to enter into a binding agreement, but is merely intended to specify some of the proposed terms and conditions of the transaction contemplated herein. Neither party may claim any legal rights against the other by reason of the signing of this letter or by taking any action to the other, or with respect to the proposed transaction, unless and until all of the terms and conditions of the proposed transaction has been negotiated, agreed to by all parties and set forth in a definitive agreement which has been signed and delivered by all parties. The only legal obligations, which any party shall have, shall be those contained in such signed and delivered definitive agreement referred to above.

Response Due Date:
We would appreciate receiving your response by Date.  Should you have any questions regarding this Request for Proposal, please do not hesitate to contact me.

The RFP is then submitted to many landlords at once. Each interested landlord then responds in writing with their proposal designed to meet the tenant’s needs.

A few weeks later the tenant will have an apples to apples comparison of their space options. Generally, they will then select two and attempt to make both landlords compete against one another by further negotiating important lease terms.

Eventually, a proposal will be accepted and used as the basis to draft the lease document.

A few final points to keep in mind:

  • Always provide your broker a detailed list of everything you need in the new space so they can effectively communicate those requirements within the RFP.
  • Leave it to the landlord to compete for the tenant’s business. It is incumbent upon them to prove how they can help the tenant, through square footage options, rates, lease terms, moving allowances, and other essential factors.
  • To prevent the RFP process from extending too far into the future, specify a firm due date for all RFP responses.
  • While the RFP process can sometimes be challenging, remember that multiple rounds are usually needed to get the best results for the tenant.
  • The tenant usually has the leverage since the landlords typically don’t know whom they are competing with or even how many other properties are in contention.

 


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About Beau Beach, CCIM

Beau is a tenacious Commercial Real Estate Broker, author and adoring father of four. His clients appreciate his no-nonsense demeanor and his legendary work ethic.

Beau leads Prowess IRES which is a commercial real estate broker for sellers in the Nashville, Milwaukee, South Florida and Chicago markets.

He’s the author of the books The 3 Reasons: Why Most Commercial Properties Don’t Sell and True Wealth: What Every Seller Should Know About 1031 Exchanges.

Beau can be reached at 414.324.4938, 615.603.9770, click to schedule a call or Beau@ProwessIRES.com