Commercial Real Estate Development Transaction Structure
This page outlines a comprehensive commercial real estate development transaction involving Stukel Development's acquisition and construction of a multi-bay garage facility in Nashua, New Hampshire, followed by a triple net lease arrangement with New England Lube. The transaction incorporates strategic purchase options and flexible equity conversion mechanisms designed to optimize returns for all parties while providing operational security for the tenant.
Transaction Flow Overview
The commercial development transaction follows a carefully structured sequence beginning with land acquisition and progressing through construction, lease execution, and eventual purchase options. This multi-phase approach allows Stukel Development to maintain control while providing New England Lube with operational certainty and future ownership potential.
NNN Lease Execution
Monthly Rent: $20,000
New England Lube enters a 15-year triple net lease prior to Stukel Development securing the land with monthly payments immediately following certificate of occupancy
Land Acquisition
Purchase Price: $525,000
Stukel Development acquires land parcel in Nashua, NH suitable for commercial garage construction
Construction Phase
Project Cost: $1,150,000
Development of multi-bay garage building financed through construction note secured by Stukel Development
Purchase Option
Price: Appraised Value
New England Lube may purchase the building and the land if the value exceeds the outstanding construction note
The transaction structure provides multiple exit strategies and value realization opportunities. The appraised value mechanism ensures fair market pricing while protecting Stukel Development's investment through the outstanding note requirement. This arrangement is particularly advantageous in appreciating markets where construction completion may significantly enhance property value beyond initial development costs.
Financial Structure and Equity Conversion Options
Key Transaction Metrics
The financial architecture of this development deal incorporates several sophisticated elements designed to balance risk and reward between developer and tenant-operator.
  • Monthly NNN lease generates $20,000 in rental income to Stukel Development following C/O
  • Initial land investment of $525,000 establishes the foundation
  • Construction budget of $1,150,000 creates modern multi-bay facility
  • Total project capitalization reaches $1,675,000
  • Purchase option triggered only when appraised value exceeds construction note balance
Stukel Development Rights
Upon exercise of the purchase option by New England Lube, Stukel Development retains strategic flexibility in structuring consideration for any excess value.
Excess Value Treatment:
  1. Cash Election: Receive surplus proceeds as immediate liquidity
  1. Equity Conversion: Take ownership stake in New England Lube operating entity at that particular location
Appreciation Capture
If the property appraises above the outstanding construction note, the excess value represents pure equity appreciation that can be monetized through cash or converted into operational equity in the tenant's business entity.
Downside Protection
The purchase option only activates when appraised value exceeds the construction note, ensuring Stukel Development is never forced to sell at a loss or before sufficient appreciation has occurred.
Strategic Flexibility
The equity conversion option allows Stukel Development to transform from landlord to business partner, participating in New England Lube's operational success rather than simply exiting the real estate position.
This transaction structure represents a sophisticated approach to commercial real estate development that goes beyond traditional build-to-suit arrangements. By incorporating flexible exit mechanisms and equity conversion rights, the deal creates alignment between developer and operator while providing multiple pathways to value realization. The triple net lease structure transfers operating expenses to the tenant, ensuring predictable cash flow for Stukel Development during the lease period. The purchase option with appraised value pricing protects both parties—New England Lube gains ownership potential at fair market value, while Stukel Development maintains downside protection and upside participation through either cash proceeds or equity stakes in the operating business.