The New Standard For Lease Protection You Need To Know
Learn Why Commercial Landlords, Tenants, and Brokers Nationwide Are Embracing Otso In Every Lease Deal
It seems like every deal lately has a couple of hot topics. Coming out of this pandemic tenant credit risk, build-out costs, and term structures have become more challenging topics in lease negotiations. As brokers and landlords ourselves, we experience this friction in almost every commercial real estate lease deal.
The friction is simple from the perspective of the business and prospective Tenant. Locking up cash for years on end, at zero percent interest is wasteful…even more so in a hyper-inflationary environment. Thus, pushback on cash collateral requirements is natural. Personal guarantees (often not worth much anyway) seem to be a default “ask” for us as Landlords to help mitigate this risk. However, as we know in practice the enforcement and collection on these is a fool's errand in 90% of cases.
Solid representation for businesses always ensures their client is putting up as little as possible when signing a lease. The gap between what Landlords need to feel comfortable and what isn’t onerous on a Tenant is massive. Deals continue to get done of course, but with either party taking more risk than they should. Great representation is a huge benefit to the industry, we love working with brokers. However, as it relates to risk dynamic, where does that leave ownership?
As Landlords we’re taking on a fair bit of risk when signing a deal, mostly in the form of up-front capital costs. Commissions and tenant allowances are baked into every deal, amortized into our rents over the term. So when we experience negative events early in this term the consequences can be painful for the asset and its investors. Is there any option besides cash and personal guarantees?
We know EVERY landlord and broker has experienced at least one deal that resulted in a large financial loss from tenant default. Just thinking about it makes our stomachs sick. We wondered if a world could exist where landlords/brokers could feel protected while bridging the gap between the very real cash and personal considerations businesses undergo when choosing their next lease.
As entrepreneurs, Otso’s founders brought this world to reality. Founded in 2019, Otso offers protection for deal costs and every instance of tenant default in commercial real estate leases with coverage for build-out costs, commissions, rent, and any other cash consideration Landlords need. On the Tenant side, they are freeing up enormous amounts of capital to do what they want to do with cash…invest in their businesses.
As Landlords, oftentimes we can be resistant to new solutions. We can’t count the number of times we have been pitched by some technology solution that will save us time, money, blah blah blah. In reality, commercial real estate works well and has for years. That’s why Otso was built to be supplementary and complementary to the way deals are structured and spaces are leased. Otso’s built to reduce friction, increase protection and free up capital with every policy we offer.
Otso offers the industry's first multi-year insurance bond in lieu of cash security requirements in commercial leases. Our product is new, so here are a few of the highlights of why we’re hitting the right notes with Landlords.
Credit and projection are enhanced on every deal. With Otso you get the Tenant and every policy is backed by an A-rated insurer and AM BEST Excellent credit. We’ve heard the knock on bonds, trust us. Otso is different. Here’s why…
Protect your assets with coverage for all of the up-front deal costs like build-out and commission fees and rent from $1K to $500K+
Otso’s average policy is getting Landlords 350% more coverage against the risks of leasing. Available for office, retail, and industrial in 43+ states.
Otso’s decisions come same-day in most cases, so we move fast. Plus our policies don’t require annual renewals so you can feel confident for the term of your lease.
Otso’s exclusive financial reports use industry-best credit assessment combined with real cash position data from businesses, at no cost.
Incentivize early renewals for your tenants, market your property deposit-free, and more…
Do Tenants like Otso? Tenants love us too when landlords use Otso to replace cash deposits or letters of credit. 9/10 tenants choose Otso when given the option in their lease. As a business, commercial real estate and the decision to lease is a massive inflection point. For offices, it’s an opportunity to work together, secure information, and collaborate as teams. While in retail and industrial it’s an essential piece of the business model for companies selling, building, or distributing products. Regardless of the many prognostications on the “death” of occupying physical space fear not, we believe companies will continue to see the value of leasing spaces as a business (becoming tenants) for many years to come.
Why would brokers recommend Otso for their clients? Brokers typically recommend us to their clients because:
Marketing properties with Otso gives them an advantage over competitors in both in their efforts to lease the building.
Not requiring a deposit is a big advantage in negotiating a deal, especially in the current cash-strapped environment for businesses.
Protecting build-out costs and deal fees gives landlords peace of mind that those funds would not be lost in the case of default.
Facilitating a transaction with Otso provides their clients with more coverage against default than cash does.
Otso also incentivizes early renewals by allowing Landlords to return existing deposits early to current tenants.
Bottom line? Otso helps brokers lease assets faster and with less risk for their clients.
Sound to good to be true? Here's what people in the industry are saying about us:
Sales and Membership Coordinator for Springdale General, Sarah Crowson, had this to say about Otso.
“The ability to offer a deposit-free lease is huge for us, as many of our potential tenants are nonprofits and startups. By marketing our space as deposit-free, everyone benefits: we can differentiate ourselves and attract tenants while those tenants are able to put the money that would otherwise be tied up back into their businesses. The Otso team took every measure to walk us through everything (answering our many questions!) to ensure we felt confident in the agreement/guarantee process and the value it can provide to all parties. ”
Here is what Immersed CEO Renji Bijoy had to say about the process.
“Otso feels like the future. For a company like ours, who fought hard to raise a great round we understand the value of capital greatly. It seemed wasteful to lock up our cash for years on end. When we heard we could avoid this scenario and sign a lease anyway, it was a slam dunk.”
Springdale General is represented by Lexie Hall with Cushman and Wakefield Austin, who had this to say about Otso and its value to her leasing process for her client:
“Otso has created an unparalleled tool to help create a beneficial alternative in favor of Tenants and Landlord’s regarding the securitization of leases. Otso allows Tenants to have capital on hand and assures Landlords that in the event of the catastrophe there will be enough security deposit on hand for all damages. This solution is a no-brainer that I hope our industry will adapt to.”
So, just to cover our bases here, this is what we like to call a win-win-win for every stakeholder (landlord, tenant, and broker) involved in this process. Getting started with Otso is 100% free to offer on all of your office, retail or industrial assets. Ask us about how to get free financial reports for life by onboarding Otso into your leasing strategies today. We love helping landlords and tenants make some deals (with less risk) today!
