TIL mattress stores aren't laundering money but playing a real estate game
common belief is so many stores selling a rarely bought product has to be laundering
The real game is buying up long leases in new strip malls, running a store that is cheap to run, maybe selling just enough to break even on the rent. The surrounding area starts to grow and the landlord can charge higher rents except to the freakin mattress store which has locked in cheap rent for 20 years. Furthermore the mattress place doesn't add value to the rest of the strip mall because of low foot traffic.
The landlord is left with 2 options: Buy out the mattress store's lease or let the store sublease.
10 Replies
6mo
They've got this comically undersized parking lot (relative to the large store size) with around 5 spaces, never seen more than 2 cars there. Yet they've been in business for 15+ years. I don't know if it's money laundering, but it's gotta be something other than selling furniture.
(In response to this post by HokieDan95)
6mo
..."broken in". TIC
(In response to this post by HokieNoVA)
6mo
I dont think mattress stores are typically getting long term (20 years) leases. Usually those long term leases are for anchor/grocery stores with credit. Now maybe 5-10 year leases with renewal options but typically renewal options are at fair market value so rates reset based on market at each option.
Second, leases typically have escalation clauses where rent steps up over time. Of course market rents could outpace the stated escalation.
Last, sublease rights usually need landlord approval and any increased rents from subtenant are shared with the landlord. Sophisticated leases will also have landlord recapture rights if tenant wants to sublease.
Are there situations as in your example, sure but sounds like mom/pop unsophisticated owner.
(In response to this post by HokieDan95)
6mo
(In response to this post by HwoodHokie)
6mo
(In response to this post by HokieDan95)
6mo
A sophisticated real estate attorney experienced at drafting leases would probably have the aforementioned guardrails in the lease so a tenant cant game the system.
(In response to this post by HokieDan95)
6mo
I'm not crafty enough to come up with schemes like that.
(In response to this post by HokieDan95)