Cold lit shell (Cold lit box)
1. One form of a shell lease, a cold lit shell is a commercial or residential building with a minimally finished interior, usually with ceilings, lighting, plumbing, interior walls (painted or unpainted), electrical outlets, elevators, rest rooms, and a concrete floor. It is essentially the same as a vanilla shell or warm lit shell building, but without a heating and cooling (HVAC) system. A cold lit shell is considered ready to lease and ready for tenant improvements (TI's), including the installation of the HVAC system. In many cases, the landlord will offer financial incentives in the form of a tenant improvement allowance (TIA), which pays for or at least partially defrays the cost of any improvements necessary for the tenant to occupy the building itself. Tenant improvement allowances do not usually include furniture, fixtures, and equipment (FFE) or trade fixtures necessary for the tenant to conduct business. Usually tenant improvements and vanilla shell improvements (VSI), or those improvements necessary to upgrade the building from a cold shell or base shell state, are not completed until the lease agreement between the tenant and landlord has been negotiated and executed. This ensures that the landlord does not pay for improvements that are unnecessary or that the tenant does not want.
2. The lease agreement or contract for a cold lit shell building. A proper cold lit shell lease should describe in detail the tenant improvements (TI's) that are to be completed, and any other information necessary for construction of the building to be completed (commonly known as build-out) prior to tenant occupancy.
Also known as a Cold lit box.
More or less the same as Cold vanilla shell, Cold vanilla box, Cold white box, or Cold white shell.
Discussion: Like many real estate terms and phrases, those associated with shell leases (e.g., vanilla shell, base shell, cold shell, warm shell, etc.) differ by location and situation, sometimes even within the same region or municipal area. As they say, the devil is in the details. The lease or sales contract should clearly and exactly specify the degree to which construction of any sort of "shell" building has been or will be completed prior to tenant occupancy.
Shell leasing and its various forms (warm, cold, base) are used primarily in commercial real estate, but are gaining popularity in upscale condominiums and townhouses and other high-end residential real estate transactions. The idea is to attract either tenants or buyers, or both, by offering customizable living units. Financial incentives in the form of tenant (or buyer) improvement allowances afford new residents the opportunity to select nearly all aspects of interior decor, including relatively large projects such as plumbing and fixtures, wiring, and interior walls.
Terms, Definitions, and Concepts: Real Estate, Construction and Building, Appraisal, Auction, Finance and Investment, Management
Added: Tue Jul 22 2008
Last Modified: Wed Jul 23 2008