However, this places extra pressure on the tenant to have that additional funding at precisely the time funding is hardest to come by. Companies want to spend their investors money on building the business, not real estate. Other landlords require letters of credit to ensure payment from their high-tech tenants. This secures the cost of the transaction with a bank in case the tenant s business shuts down, covering the landlord s expense of finding a new tenant and marketing the space. Although this is the preferred method of securitization for technology companies, it poses a challenge to find banks and landlords experienced in this form of securitization.
Warrants are another increasingly popular method of securing payment.
Savvy landlords are noticing that there is an opportunity to profit from some of the hot companies in the high-tech industry. Rather than using letters of agreement, many landlords opt to secure the lease by securing stock options with the tenant s company. This way, landlords can benefit from their tenants growth in valuation. This is also a good option for high-tech companies because it does not require additional capital expenditure for up front costs required by some transactions. Seattle has never seen anything like the growth of its high-tech companies.