Commercial real estate question

[detlef]

I am involved in a rather complicated lease extension negotiation the details of which I would rather just discuss via pm with anyone who typically represents the landlord side of deals or, I suppose, has negotiated enough extensions from the tenant side to know what reasonable expectations are.

 

In short (and for rather complex reasons), I am sort of joined at the hip with a neighboring business who has his own reasons why he needs to extend the terms of a lease due to expire in 2014. For the same batch of complex reasons, they sort of need me to play ball and also need me to re-up as well. Not doing so is possibly not a deal breaker but would certainly qualify as playing hard ball. All things being equal, I would prefer to hold off until closer to the finish date and, while amenable to eventually re-upping, am not 100% certain I want to even then (but I would place the odds at very high that I would want to). That said, I don't want to needlessly hold things up, so if I can negotiate something that makes sense for me to push the lease out another 5 years, I'm willing to do so. Of course, I would be happy to explain the specifics via pm.

 

I have never been in a place long enough to negotiate a second lease, so I don't know what a tenant can typically expect in terms of incentives to do so.

 

TIA

[Cunning Runt]

I am involved in a rather complicated lease extension negotiation the details of which I would rather just discuss via pm with anyone who typically represents the landlord side of deals or, I suppose, has negotiated enough extensions from the tenant side to know what reasonable expectations are.

 

In short (and for rather complex reasons), I am sort of joined at the hip with a neighboring business who has his own reasons why he needs to extend the terms of a lease due to expire in 2014. For the same batch of complex reasons, they sort of need me to play ball and also need me to re-up as well. Not doing so is possibly not a deal breaker but would certainly qualify as playing hard ball. All things being equal, I would prefer to hold off until closer to the finish date and, while amenable to eventually re-upping, am not 100% certain I want to even then (but I would place the odds at very high that I would want to). That said, I don't want to needlessly hold things up, so if I can negotiate something that makes sense for me to push the lease out another 5 years, I'm willing to do so. Of course, I would be happy to explain the specifics via pm.

 

I have never been in a place long enough to negotiate a second lease, so I don't know what a tenant can typically expect in terms of incentives to do so.

 

TIA

 

PM me.

 

I was on the LL side of a shopping center company for 6years, a middle man (commercial broker for 3 - still have my license), and have been on the tenant side of things for a national retail chain for 6years now.

 

Negotiating leases is what I do for a living and do some consulting along the lines you're discussing on the side.

 

I may be able to help you.

[SEC=UGA]

PM me.

 

I was on the LL side of a shopping center company for 6years, a middle man (commercial broker for 3 - still have my license), and have been on the tenant side of things for a national retail chain for 6years now.

 

Negotiating leases is what I do for a living and do some consulting along the lines you're discussing on the side.

 

I may be able to help you.

 

Any info you could post here shedding some light on the details of how this stuff works would be greatly appreciated. I've not had any experience with this side of the RE world and would find it to be an interesting read... If you and Det are ok with posting the info.

[detlef]

PM me.

 

I was on the LL side of a shopping center company for 6years, a middle man (commercial broker for 3 - still have my license), and have been on the tenant side of things for a national retail chain for 6years now.

 

Negotiating leases is what I do for a living and do some consulting along the lines you're discussing on the side.

 

I may be able to help you.

pm sent

 

 

Any info you could post here shedding some light on the details of how this stuff works would be greatly appreciated. I've not had any experience with this side of the RE world and would find it to be an interesting read... If you and Det are ok with posting the info.

I actually wouldn't mind sharing more bits of the saga once it plays out.

[Cunning Runt]

pm sent

 

 

 

I actually wouldn't mind sharing more bits of the saga once it plays out.

 

PM replied.

 

Okay by me to discuss in an open forum.

[darin3]

 

I was going to offer my and end my thoughts with "oh yeah, you need to talk to Cunning Runt", but it looks like I'm late to that party. I'd be interested to see the conversation as well.

[detlef]

PM replied.

 

Okay by me to discuss in an open forum.

Thanks mucho for the help. I'm actually dying to share the story myself because it's rather sorted. It's just that, I suppose some degree of discretion is in order at least until negotiations are complete.

[Cunning Runt]

Thanks mucho for the help. I'm actually dying to share the story myself because it's rather sorted. It's just that, I suppose some degree of discretion is in order at least until negotiations are complete.

 

No problem. I get a kick out of this sort of stuff.

 

Got your pm. I think your strategy is solid. I'll be interested to know how it works out. One thing I could see coming up is that the LL's lender may not allow the LL to take you off as a signator/guarantor. I'd have an argument ready for that, which I think you do.

[detlef]

No problem. I get a kick out of this sort of stuff.

 

Got your pm. I think your strategy is solid. I'll be interested to know how it works out. One thing I could see coming up is that the LL's lender may not allow the LL to take you off as a signator/guarantor. I'd have an argument ready for that, which I think you do.

Well, I got what I needed out of today's meeting. Essentially, I said that we just needed to chop the thing in half and then each of us independently work out what we needed to do. They went for it. The bummer is that my position is somewhat marginalized because they already feel like they had to give in to get me off the other lease and allow me to negotiate my own.

 

The ball is in my court to give them an idea of what, above and beyond getting me off the other lease, I need to extend. I'm concerned though because he doesn't seem to anxious to play ball.

[Cunning Runt]

Well, I got what I needed out of today's meeting. Essentially, I said that we just needed to chop the thing in half and then each of us independently work out what we needed to do. They went for it. The bummer is that my position is somewhat marginalized because they already feel like they had to give in to get me off the other lease and allow me to negotiate my own.

 

The ball is in my court to give them an idea of what, above and beyond getting me off the other lease, I need to extend. I'm concerned though because he doesn't seem to anxious to play ball.

 

Well, to me the separate lease is a totally different issue than extending issue. You have deal-breakers, and then you have negotiated points. This was a deal-breaker for you so no sense even talking about the other stuff (extension & terms) unless you got that out of the way first.

 

Now from your perspective, the extension should be another matter. Under what terms are you comfortable extending for 5years? That carries a real and tangible benefit to the LL, particularly, if as you say, you pay your rent on time. And it does carry risk for you. Who's to say the area will still be where you want to be 6 years from now? Who's to say that the LL will continue to run a decent center (he could sell it and you're left with an owner you're uncertain of - and maybe doesn't care as much about running a decent property). He needs to share in that risk by reducing the rent in exchange for that early renewal. And you should be rewarded now. Reduce rent by 25% now and extend the 5years at that reduced rent - basically for an example using simple math, if your rent is currently $10psf, you want it for $7.50 psf not only now, but for 7yrs - or whatever the duration would be with the balance of your existing term plus the 5yr renewal.

 

You can ask for the other stuff - co-tenancy, exclusive clause, etc.... but I'd consider them throwaways . something to give back to let the LL think he got something when they really weren't deal-breakers for you to begin with.

 

I don't know what sort of physical improvements you need to make, but I'd have more weight on these and ask for his help in the form of free rent. Your willingness to spend money shows a commitment to the property.

 

I'd also get some more options built into the deal. I don't know how many you have left, but you don't want to get stuck at the end of your term with the LL having leverage on you. And the option renewal rate should be pre-negotiated based off the lower rate you got for extending.

 

He'll play ball if he thinks you'll leave. Unless, and this is a big unless - the area is in high demand and he'd be able to replace you quickly.

 

I'll be curious to know how this shakes out.

 

Good luck