May 9, 2008

Bird Blog: Week 2

Every week, Jennifer Mankins, owner of Park Slope- and Cobble Hill-based boutiques Bird, tells us about the new 2,500-square-foot store on Grand Street in Williamsburg that she's getting ready to open.

I'd like to thank everyone that read the first post and for all the supportive and encouraging comments. I would also like to clarify that the Williamsburg location will not replace the Park Slope and Cobble Hill stores. They will remain open. So…if you couldn’t tell from the first post last week, I was smitten with the space. I have seen lots of properties over the years, from dumps that I never even placed bids on to dream spaces where I could clearly envision the future of Bird. This was definitively the latter and I was trying hard not to get too excited. I decided I should call in the troops, to get second opinions. Not wanting to waste any time, I scheduled an appointment that weekend for my own “panel of experts” to visit the space with me a second time: my sister and my husband plus two good friends – an architect and a local commercial real estate broker/developer. The building was built right before the turn of the 20th century, between 1896 and 1898. After the jump, find out what the experts uncovered and how our rent negotiations went...

The landlords bought the building thirteen years ago and had lived there for eight years. During that time, they had personally done much of the structural and cosmetic renovations – poured a new concrete slab for the extension, added new iron to the storefront, updated plumbing and electrical, added a new roof. Therefore, they were able to answer the technical questions posed by my team. Do the skylights leak? Are they easily opened and closed? How old is the roof? Where are the structural support walls and beams? How old is the HVAC? Is it gas or electric? What’s the tonnage? Is the basement dry? Is the ceiling already fire-rated? Finally, why had it been on the market for so long?

The skylights were in good working condition, and didn’t leak. The roof was fairly new, as was the HVAC. The basement was dry enough and the ceilings were up-to-code. It was obvious that the landlords cared a great deal about the building and were very particular about who they’d rent the space to. For instance, they didn’t want a restaurant, which eliminates a lot of potential tenants. I took their carefulness as a good sign. It was beautiful and unique, the right size, in the right location, in great shape, for almost the right price.

As for negotiations, I am used to the usual slow-paced back-and-forth between would-be tenants, brokers, landlords, and lawyers. It can take months and is often a giant pain, but that's just usually how it’s done. To my very happy surprise, the landlords simply invited me over to sit down and personally negotiate all the major points of the lease, leaving only the finer points for the lawyers. This direct approach meant we were likely to reach an agreement quickly, but also meant I only had a couple of days to figure out what I could realistically afford. For every possible lease scenario, I had to consider the impact on my business plan.

Rent is the first thing to consider when thinking about a lease. For retail stores, I have always heard that rent should ideally equal 5% of sales. Clearly whoever came up with this equation never lived and worked in NYC! However, it’s still a benchmark I use as a starting point. Other major considerations for a commercial lease are the lease term, annual rent escalations and rent concessions.

The initial asking terms were:

$8500 per month, or about $41 per square foot annually
5% annual rent escalations
1 month rent-concessions
5 year term

I offered:

$7000 per month or $34 per square foot annually
3% annual rent escalations
6 months rent-concessions
15 year term

We met squarely in the middle, all over a cup of tea one afternoon on Roebling Street. So far, so good…..

Bird Blog: Week 1 [Brownstoner]

Posted by Gabby at 11:30 AM | Comments (11)
Categories: Renovation, Streetlevel, Williamsburg

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