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3 Big Lessons This Restaurateur Learned About Buying Commercial Real Estate
Make sure these things are in order before attempting to find the office or retail store of your dreams.
When it comes to restaurants, Terence Tubridy has been involved in every type of real estate transaction you can think of. And he has learned his fair share of lessons along the way.
Tubridy is the co-founder and president of In Good Company Hospitality Group, a full-service food and beverage consulting firm, as well as owner of several popular New York City destinations, including Refinery Rooftop, Parker & Quinn, and Park Avenue Tavern.
Since the company's founding in 2010, Tubridy and his team have owned and developed restaurant real estate as well as leased space—often working with an agent to simplify the search and help with details such as the term sheet process. In Good Company has even set up management arrangements, such as operating a bar or restaurant within a hotel or other established business.
From personal experience, Tubridy, 37, says he has learned over the years that the most important key to success in purchasing or leasing commercial real estate is paying attention to the small details, especially during the lease or purchase negotiation process. "It's exciting to find a space you fall in love with and easily get wrapped up in designing, marketing and planning, all the while forgetting the small stuff up front that can make or break your success," he says.
Here are Tubridy's three biggest lessons about purchasing commercial real estate, no matter what industry you're in.
1. Look for a space that helps you "tell a story.'
Most everyone has heard that location plays a major factor when buying commercial real estate. Tubridy takes the concept a step further. Not only is he interested in foot traffic and whether the neighborhood is flush with his target customers, he wants to know if the space has a story to tell, or if it embodies the concept he has for the business.
"We go through a hundred questions before we determine if a space may work," Tubridy explains. "Most importantly, "Does the space tell a story? Does it speak to you when you walk through it?'"
In other words, consider if it has some unique feature(s) that spark people's interest and curiosity. Does the layout match the vision you have for your restaurant, store or office space? No matter what industry you're in, you want a space that attracts customers, clients and employees.
"If your space can help you tell a good story, then your guests and customers will pass that story along to their family and friends," Tubridy says.
2. Know your financials up front.
Whether buying or leasing, price is often what real estate deals come down to. Beyond the price per square foot of the space and terms of the agreement, having accurate financial projections helps you make the most informed decisions about what you're able to spend or finance, Tubridy says. If needed, go over these figures with an accountant.
Your projections should illustrate the growth you expect to realize as a result of this acquisition or move. They should also account for your company's debt-to-equity ratio, depending on how much money you'll need to finance.
Also make specific estimates about costs related to capital improvements. "Do not invest money into a building that you cannot recoup within two to three years, according to your projections," Tubridy says. If leasing, make sure your lease includes a tenant Improvement allowance. "If you're leasing, the building is theirs not yours, and when you leave they have the asset, you do not."
3. Enlist the help of experts.
Entrepreneurs are laser-focused on building a product or service—not on becoming a real estate expert. With so many factors to consider, the process of finding and negotiating the perfect piece of commercial real estate can be stressful.
That's why Tubridy recommends enlisting help from experts to help advise you along the way. One crucial expert is a Realtor®—a member of the National Association of Realtors®—who specializes in commercial properties and is able to help you find the right space in the right neighborhood, as well as offers advice on other logistical details.
Another important expert is an attorney—especially one who knows your industry, Tubridy recommends. An attorney can help inspect the physical attributes of a property and advise during negotiations, protecting you and your interests during an often long and grueling process.
After all, entrepreneurs aren't super human. It's smart to ask for help when you're not the expert.
A Realtor®—a member of the National Association of Realtors®—can help you find the right place to grow your business.