With competition for prime branch sites more intense than ever, credit unions and banks are moving quickly to secure their next locations. Perhaps too quickly. In the rush to outrace competitors into the next hot market, financials sometimes neglect to include some basic provisions into their sale or lease agreements that could save the institution considerable angst in the future.
One way to improve the likelihood of securing the most advantageous possible site is to enlist the assistance of an experienced commercial real estate agent. Given that you'll pay a commission at closing anyway, you'll be well served utilizing an experienced professional to review your institution's letters of intent and contracts. But for those who insist on "do it yourself" negotiations, keep in mind the following items, most of which apply to sites within broader developments.
* Both sale and lease transactions can include non-compete clauses. Seek contracts that prevent the sale or lease of other parcels/storefront in the same development to other financial institutions. Be sure to include brokerages in your definition of financial institution. If your site resides in a grocery-anchored strip center, include a prohibition against an in-store bank in the lease document.
* If your site is an outparcel with limited parking space, request cross-parking rights for CU employees in the center's main parking lot. If your site is an inline space, seek reserved parking in front of your bay.
* In leased spaces, be wary of requirements that mandate continuous operation. Some leases include severe penalties for not maintaining operations. Avoid such language; if the credit union ever decides to close the branch, it should be able to do so without facing excessive rent above and beyond the remaining lease payments. But in order to minimize attrition in the event of a closing, do include a clause prohibiting the lessor from leasing the space to a financial institution within six months of the end of your credit union's lease term. And always reserve the right to sublease the facility; so that in the event of a closure, your credit union can recoup some of its remaining lease payments and control what entity assumes its branch facility.
* Specify signage rights and obligations in detail, including the amount and placement of signage on the main shopping center pylon. Further, some shopping center contracts mandate that all tenant signs share a common color or font. If this will compromise your CU's brand, seek an exception in your contract.
* Ensure that the center maintains certain minimum standards by including an option to terminate the lease if occupancy falls below a certain level or if common areas such as parking lots are not appropriately maintained.
* For outparcels, specify whether the credit union or the developer is responsible for site preparation; and for leases, the level of completion at which the space will be delivered. Prompt the developer to take on as much of these costs and efforts as possible-even if some are passed through to your CU, the developer's cost may be lower than what the institution could obtain independently.
* Finally, even in the hottest market, don't offer list price. Present value is a concept well familiar to all credit unions: a certain offer today is worth more to the developer than the uncertain possibility of a higher offer tomorrow. Bid low and you may find your offer accepted so that the developer can realize cash flow sooner rather than later. If your initial offer is refused, you can always increase it later.
Steven Reider is the founder of Bancography, Birmingham, Ala. For info: www.bancography.com.
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