Key Takeaways

  • Jerry Cedicci bypassed a restrictive non-compete lease clause for a restaurant space on Walton Street by installing standing counters instead of traditional seating.
  • He embedded an unpriced 10-year purchase option into the commercial lease for the entire 72,000-square-foot building, fixing the strike price at $10 million.
  • At the end of the 10-year lease term, Cedicci executed the option at $10 million and converted the property into luxury extended-stay residences.
  • The repositioned asset, rebranded as the Walton Residence, appraised at $22 million upon completion.

The Method

Cedicci wanted to open Café Croissant in a 72,000-square-foot building on Walton Street in Chicago. The landlord, a practicing attorney, immediately rejected the retail concept due to a legal conflict. A third-floor restaurant tenant, Lupro, held an exclusive covenant in its lease barring any other seated restaurant from entering the building.

Cedicci resolved the dispute with a structural workaround: “The landlord had a restaurant called Lupro in the building in the third floor and he had a clause with the restaurant that he cannot sell to he cannot rent to another restaurant... I said that's not an issue. I have solution for that. I'm just going to put some high table. We call them counters in France and people they come in they have their coffee they do with standing. There is no sitting.”

Once the lease obstacle cleared, Cedicci paired the retail agreement with an asset acquisition structure. He asked the landlord for a long-term purchase option on the entire building. The landlord questioned why a tenant with a contested retail lease should receive an option on the whole property. Cedicci framed the ask around the landlord's lack of downside risk: “I said, so what do you have to lose? Giving me an option. It shouldn't be difficult for you.”

He set the strike price at $10 million, payable after a decade: “I offer him $10 million. I'll buy the building at $10 million at the end of my lease. They look at each other and they can said they are thinking where does this crazy guy came from? I said I went in the lease. I went to have my option to buy the building. And at the end of 10 years, I bought the building and I paid $10 million.”

Cedicci completed the purchase, renovated the upper floors, and converted the property into extended-stay suites. “The building when I rehabed it and I turned it into the Walton residence appraised for $22 million.”

Where This Breaks Down

Long-term fixed-price options require a landlord who misprices inflation or expects the tenant to fail before expiration. A sophisticated real estate fund or institutional owner will rarely grant a ten-year locked price option without substantial upfront option premiums, annual escalation clauses, or appraisal-based resets.

This structure also requires the tenant to survive at that location across market cycles. If the underlying retail operation folds in year three or five, the tenant loses operational cash flow and surrenders the embedded option before real estate appreciation materializes.

Why It Matters

Long-duration purchase options inside operating leases create pure asymmetric upside for operators. The structure transfers future asset appreciation to the tenant while fixing downside exposure to normal operational rent. When market values surge over a ten-year horizon, the tenant captures the equity delta without carrying the debt service or balance sheet risk during the intervening decade.