Overall Structure Report
Entertainment Venue — Complete Deal Architecture — Generated March 23, 2026
1. Executive Summary
This report summarizes the complete structure of the entertainment venue deal, covering both the real estate investment (landlord/property LLC) and the tenant operating business (entertainment venue LLC). The two entities are linked by a Triple Net (NNN) lease and a Tenant Improvement (TI) loan extended by the landlord to fund the tenant’s buildout. Together, the two entities deploy $3,199,000 of combined capital to acquire, renovate, and operate a 10,200 SF entertainment venue.
Real Estate LLC — Key Metrics
Tenant LLC — Key Metrics
2. Deal Structure Overview
The deal involves two separate legal entities connected by a lease agreement and a TI loan. The Real Estate LLC owns the building and serves as landlord. The Tenant LLC operates the entertainment venue and pays rent.
Real Estate LLC (Landlord / Property Owner)
Acquires and renovates a 10,200 SF commercial building. Financed by $1,100,000 equity from 6 investors, a $0 purchase mortgage (0.0% LTV at 7.5%), and a $1,599,000 renovation loan at 8.0%. Total investment: $2,498,500. Earns base rent, NNN recoveries, and TI loan interest income. Targeted exit at 7.0% cap rate after 10 years.
Lease & TI Loan (The Connection)
Lease: Triple Net, 10-year term at $24/SF/yr
($20,400/mo), escalating 3.0%/yr.
Tenant pays property tax and insurance as NNN pass-throughs.
TI Loan: Landlord lends $200,000 to tenant at
7.0% over 5 years ($3,960/mo).
Tenant repays from operating cash flow.
Tenant LLC (Operator / Entertainment Venue)
Operates a multi-concept entertainment venue: restaurant, bar, arcade, virtual golf, and private lounges. Funded by $300,000 equity from 3 investors plus the $200,000 TI loan from the landlord. Year 1 revenue: $2,734,667. Vendor-shared machines on 50.0% revenue-share lease (eliminating $358,000 vendor CapEx); business-owned classics/skee-ball/Guitar Hero purchased for $68,000 with 100% revenue retained.
3. Ownership Structure
Real Estate LLC Investors
| Investor | Contribution | Ownership % |
|---|---|---|
| Investor A | $420,000 | 36.0% |
| Investor B | $265,000 | 23.0% |
| Investor C | $210,000 | 18.0% |
| Investor D | $105,000 | 9.0% |
| Investor E | $100,000 | 9.0% |
| Investor F | $0 | 5.0% |
| TOTAL | $1,100,000 | 100.0% |
Tenant LLC Investors
| Investor | Contribution | Ownership % | Notes |
|---|---|---|---|
| Investor 1 | $150,000 | 33.3% | Serves as General Manager; subject to vesting schedule — grows to 50% by Year 10 |
| Investor 2 | $150,000 | 33.3% | Common equity; diluted by Investor 1 vesting from Year 3–10 (25% at full vesting) |
| Investor 3 | $0 | 33.3% | Sweat equity; $0 cash contribution; diluted by Investor 1 vesting from Year 3–10 (25% at full vesting) |
| TOTAL | $300,000 | 100.0% |
4. Capital Stack
The full deal requires $3,199,000 of combined capital across both entities. The TI loan of $200,000 appears in both stacks — as a use of capital for the RE LLC (deployed to tenant) and as a source of capital for the Tenant LLC.
| Party | Source | Amount | Type | Rate / Terms | Notes |
|---|---|---|---|---|---|
| Real Estate LLC | Equity (6 investors) | $1,100,000 | Equity | Pro-rata equity | NaN |
| Real Estate LLC | Purchase Mortgage | $0 | Debt | 7.5% / 30-yr amort | NaN |
| Real Estate LLC | Renovation Loan | $1,599,000 | Debt | 8.0% / 30-yr term | NaN |
| Real Estate LLC → Tenant | TI Loan (to tenant) | $200,000 | Debt (inter-party) | 7.0% / 5-yr term | NaN |
| Tenant LLC | Equity (3 investors) | $300,000 | Equity | Common equity | |
| Tenant LLC | TI Loan (from landlord) | $200,000 | Debt (inter-party) | 7.0% / 5-yr term | NaN |
5. The Property
A 10,200 SF commercial building purchased for $400,000 and renovated with a $2,059,000 budget to create a purpose-built entertainment venue. Construction takes approximately 12 months; rent commences in Year 2.
| Parameter | Value |
|---|---|
| Building Size | 10,200 SF |
| Purchase Price | $400,000 |
| Renovation Budget | $2,059,000 |
| Total RE Investment | $2,498,500 |
| Assessed Value (Pre-Reno) | $397,800 |
| Assessed Value (Post-Reno) | $1,887,000 |
| Mill Rate | 15.8 per $1,000 |
| Exit Cap Rate | 7.0% |
| Hold Period | 10 years |
| Projected Sale Price | $4,599,272 |
| Net Sale Proceeds | $2,939,214 |
| Zone | Sq Ft | % of Total | Description |
|---|---|---|---|
| Restaurant Dining | 1,700 | 16.7% | Tables, booths, and casual dining area |
| Kitchen | 1,200 | 11.8% | Gas cook line, 4-stack gas pizza ovens, prep, walk-in cooler |
| Bar | 800 | 7.8% | Bar counter, stools, liquor storage, taps, back bar coolers |
| Arcade Floor (Double-Height) | 2,700 | 26.5% | 45 machines in double-height open space; pinball, racing, classic cabinets, bar games |
| Virtual Golf | 750 | 7.4% | 1 enclosed golf simulator bay with hitting area and lounge seating (second floor) |
| Private Lounges & Console Gaming | 1,950 | 19.1% | Two rentable private event/party lounges + console gaming balcony overlooking arcade floor (second floor) |
| Back of House | 900 | 8.8% | Restrooms (ground + 2nd floor), storage, mechanical, office, egress stair |
| Outdoor Games (Unconditioned) | 2,400 | 23.5% | Covered 40'x60' outdoor area; no HVAC — excluded from conditioned/lease SF. Includes outdoor games, outdoor dining tables, and a Summer Bar service station along the storefront wall |
| TOTAL | 12,400 | 100.0% |
6. Lease Structure & Financial Flows
Under the NNN lease, the tenant pays base rent plus property tax and insurance pass-throughs. The lease also includes a percentage rent kicker: once the tenant’s annual gross revenue exceeds $2,000,000, the landlord receives an additional 4.0% of all gross revenue above that threshold. This aligns landlord upside with business performance while avoiding stress on early-year operations. The chart below shows the total annual cash flowing from the tenant to the landlord each year (base rent + NNN + TI loan repayment) alongside the tenant’s operating income — the cushion available to cover those obligations.
| Term | Detail |
|---|---|
| Lease Type | Triple Net (NNN) |
| Leasable SF | 10,200 SF |
| Base Rent Rate | $24/SF/yr ($20,400/mo) |
| Annual Escalation | 3.0% |
| Lease Term | 10 years |
| Vacancy Allowance | 5.0% |
| NNN — Property Tax (Yr 1) | $6,285 |
| NNN — Insurance (Yr 1) | $8,000 |
| NNN Total (Yr 1) | $0 |
| TI Loan Amount | $200,000 |
| TI Loan Rate | 7.0% |
| TI Loan Term | 5 years |
| TI Monthly Payment | $3,960 |
| Percentage Rent Threshold | $2,000,000 annual gross revenue |
| Percentage Rent Rate | 4.0% of gross revenue above threshold |
7. 10-Year Financial Comparison
Year 2026 is the construction period: the landlord has no rent income and is drawing down renovation financing; the tenant is pre-opening. Operating years begin in 2027. Both entities grow through the hold period as rent escalates at 3.0%/yr and tenant revenue grows at 4.0%/yr.
| Year | Base Rent | NNN Recovery | Landlord NOI | Landlord CF | Tenant Revenue | Tenant Oper. Inc. | Tenant Net Inc. | Tenant Margin |
|---|---|---|---|---|---|---|---|---|
| 2026 | $0 | $0 | -$26,285 | -$95,575 | $2,734,667 | $1,318,155 | $1,025,832 | 37.5% |
| 2027 | $252,144 | $38,651 | $238,561 | $134,888 | $2,844,054 | $1,378,802 | $1,040,484 | 36.6% |
| 2028 | $259,708 | $39,506 | $246,260 | $145,271 | $2,957,816 | $1,442,112 | $1,095,375 | 37.0% |
| 2029 | $267,500 | $40,381 | $254,122 | $156,010 | $3,076,128 | $1,508,199 | $1,152,796 | 37.5% |
| 2030 | $275,525 | $41,276 | $262,145 | $167,119 | $3,199,174 | $1,577,182 | $1,212,858 | 37.9% |
| 2031 | $283,790 | $42,192 | $271,882 | $131,088 | $3,327,141 | $1,649,184 | $1,323,202 | 39.8% |
| 2032 | $292,304 | $43,129 | $283,770 | $142,975 | $3,460,226 | $1,724,333 | $1,388,901 | 40.1% |
| 2033 | $301,073 | $44,087 | $296,067 | $155,272 | $3,598,635 | $1,802,764 | $1,457,605 | 40.5% |
| 2034 | $310,105 | $45,067 | $308,788 | $167,994 | $3,742,581 | $1,884,616 | $1,529,444 | 40.9% |
| 2035 | $319,408 | $46,069 | $321,949 | $181,154 | $3,892,284 | $1,970,034 | $1,604,556 | 41.2% |
8. Unified Project Cost Schedule
Every dollar required to bring the project from ground-break to opening day, shown in one list. Landlord items are funded by the RE entity through the construction-to-perm loan and appear in the Real Estate Report. Tenant items are funded by the business entity through investor equity and the TI loan and appear in the Business Report. The landlord and tenant subtotals should equal the respective totals shown in each of those reports.
| Cost Item | Amount | Responsibility | Notes |
|---|---|---|---|
| Core & Shell | |||
| Core & Shell (PEMB Steel Frame, Roof, Siding, Storefront) | $815,000 | Landlord | PEMB tapered columns/rafters, 4:12 roof, metal panel siding/roof, storefront glazing (1,112 sf), second-floor open-web joists, passenger elevator, dumbwaiter, egress stairs (interior + exterior steel), restrooms (ground + 2nd floor), polished concrete slab (7,830 sf), sag-and-bag black ceiling, low-pile carpet (2nd floor), exterior brand graphic mural. |
| MEP Systems | |||
| HVAC (RTUs, Ductwork, Zoning, ERV) | $185,000 | Landlord | Rooftop RTUs (~45-55 tons total), ductwork incl. perforated fabric ducts over double-height games zone, VAV zoning for kitchen/dining/arcade/second-floor lounges, ERV for high-occupancy ventilation. Kitchen exhaust hoods and make-up air included in Kitchen Equipment line. |
| Electrical (800A Service, Panels, All Circuits) | $180,000 | Landlord | 800A 208Y/120V 3-phase service, main switchboard, subpanels for kitchen/HVAC/games/second floor. Hundreds of 20A game circuits, 208V feeds for RTUs and kitchen equipment. Minimal LED mood/egress lighting. Fire alarm tie-in and emergency lighting. |
| Plumbing, Grease Trap & 100-ft City Connections | $82,000 | Landlord | Domestic water and sanitary rough-in, 100-ft city water/sewer connections, underground grease interceptor outside kitchen wall, gas piping from meter to kitchen. All fixtures for ground and second-floor restrooms. |
| Fire Sprinkler System (NFPA 13, Wet-Pipe) | $25,000 | Landlord | Full wet-pipe sprinkler coverage, 10,200 sf footprint. Light hazard (assembly/gaming) and ordinary hazard (kitchen). Includes design, piping, heads, riser, and alarm tie-in. |
| Kitchen & BOH | |||
| Kitchen Equipment, Hoods & Make-Up Air | $110,000 | Landlord | Gas cook line, 4-stack gas pizza ovens, commercial exhaust hoods with ANSUL fire suppression, make-up air unit, walk-in cooler. Bar service equipment (draft taps, back-bar coolers) is a separate tenant cost. |
| Interior Fit-Out | |||
| Interior Fit-Out (Bar Millwork, AV/Projection, Signage) | $175,000 | Landlord | Bar counter millwork and structure, gaming projection infrastructure (3 ceiling-mounted projectors + hanging screens over arcade floor, structural wiring), interior architectural signage/branding millwork. Operational A/V (TVs, PA, sound bars) and tenant signage are separate tenant costs. |
| Site & Civil | |||
| Site Work (Parking, Drives, Landscaping, Lighting) | $125,000 | Landlord | Parking lot and drives, landscaping, exterior site lighting, outdoor area ground treatment (~1,185 sf compacted gravel + ~1,185 sf artificial turf). |
| Soft Costs | |||
| Permits, Architecture & MEP Engineering | $175,000 | Landlord | Architectural design and construction documents, MEP engineering stamps, structural engineering, building permits, soils report, survey, testing and inspections. |
| Contingency | |||
| Contingency (~10%) | $187,000 | Landlord | ~10% construction contingency on hard and soft costs. |
| Buildout & Equipment | |||
| Owned Electronic Arcade Machines | $68,000 | Tenant | Business-owned machines (classic 2-player ×6, classic 4-player ×4, skee-ball ×4, Guitar Hero ×1) per cost PDF. No revenue share — business keeps 100% of gross. See ARCADE_MACHINES_OWNED for spec. |
| Owned Bar & Outdoor Games | $17,000 | Tenant | Non-electronic venue-owned games per floor plan outdoor area: shuffleboard tables, dart boards, foosball tables, cornhole sets, and other outdoor bar game equipment. |
| Bar Equipment & Fixtures | $35,000 | Tenant | Draft beer system, back-bar coolers, glassware, bar rails, sinks. Bar counter structure/millwork is landlord-installed under Interior Fit-Out. |
| Dining Room Furniture | $40,000 | Tenant | Tables, chairs, and booth seating for 80-seat dining room. |
| Bar & Lounge Furniture | $15,000 | Tenant | Bar stools, high-top tables, lounge and waiting area seating (second-floor private lounges and console gaming area). |
| Outdoor Furniture & Summer Bar Setup | $12,000 | Tenant | Patio furniture for 40'x60' outdoor area per floor plan: picnic tables, high-top tables, bar stools, summer bar service station setup. Outdoor games equipment is tracked separately above. |
| Signage & Branding | $20,000 | Tenant | Exterior monument/blade sign at street entrance, interior menu boards and branding elements. Exterior building brand mural is landlord-installed under Core & Shell. |
| Technology | |||
| POS & Technology Systems | $25,000 | Tenant | POS terminals, reservations platform, loyalty program, network infrastructure. |
| Audio/Visual & Sound System | $18,000 | Tenant | Commercial TVs (bar/dining), PA/speaker system, sound bars. Gaming projection screens and projectors are landlord-installed under Interior Fit-Out; this covers operational A/V only. |
| Security & Surveillance | $8,000 | Tenant | IP camera system, access control, alarm monitoring subscription. |
| Pre-Opening | |||
| Initial F&B Inventory | $20,000 | Tenant | Opening food stock, beverages, full bar spirits and beer inventory. |
| Pre-Opening Marketing | $25,000 | Tenant | Social media launch campaign, local advertising, grand opening event. |
| Permits, Licenses & Legal | $14,000 | Tenant | Liquor license, business license, health permit, entity formation, lease review. |
| Working Capital | |||
| Working Capital Reserve | $40,000 | Tenant | ~3-month buffer for payroll and fixed expenses during ramp-up. |
| Contingency | $15,000 | Tenant | ~4% reserve on buildout and pre-opening line items. |
| Landlord Subtotal | $2,059,000 | Landlord | |
| Tenant Subtotal | $372,000 | Tenant | |
| Grand Total — All Project Costs | $2,431,000 | ||