First, from me, consider that this can and should be viewed in the same way that initially negotiating for a space is viewed, with some advantages: you already have a relationship with the landlord, you are already in the space, ideally you have a good history with them. Perhaps most importantly, it is less expensive to work with you, the tenant that they know and have already paid to have in the space, than an unknown.
Consider the costs that a landlord has incurred in getting you into the space. They have paid a broker to find you and negotiate with you. They have already paid for tenant improvements, which is often the value of a significant number of months of rent. They have a vested interest in keeping an existing tenant in the space rather than having to go out and find another tenant to fill the space and to incur the same costs again.
The coronavirus, in some ways, is a great leveler as well. The demand for new spaces is likely to be low and there is less of a guarantee that a new tenant is going to succeed. It is to the advantage of the landlord to keep an existing tenant in the space than to incur the costs to find a new tenant.
Additionally, an empty space is more likely to experience wear and tear at the landlord’s expense.
Rebecca’s family has already begun to consider how they can keep their existing tenants. They realize that while they are hoping to recoup their lost revenues in January of 2021 by deferring missed rents until then, as they near that point that they may need to re-negotiate.
What her family is most concerned about, because they have few mortgages, is getting paid their CAM and/or NNN. In other words, they are less interested in whether or not they make money right now, but more interested in not having to pay *out* money at this time.
This demonstrates that it is important to try to find out what is motivating the landlord that you are negotiating with. The easiest way to do this is to *ask them*. At least in the case of Rebecca’s family, while of course they want to make money, they are empathetic to the plight of their tenants and would rather keep existing tenants, and have good relationships for the future, than go for any Machiavellian goals.
Which is something to realize on our side too. This is *not* a time to try to go for the deals that have nothing to do with the current crisis. By dealing genuinely and honestly with landlords we are more likely to help ensure positive outcomes for everyone. We are in this for the long haul and we want to forge good alliances with those we work with, at all levels of the industry.
If you are dealing with a large conglomerate, you may not have the leeway that you might have with a family owned center. In this case you may have to try to encourage a sympathetic manager to go to bat for you.
When you go to negotiate with your landlord or their agent, you should be ready to provide them with documentation showing your financials. You also should see if you can collect statements from adjoining businesses showing how you work with them to bring more customers into a center.
Don’t look at this as a “Tenant versus Landlord” interaction. Look at this as a “Tenant and Landlord working together to overcome a common problem” interaction.
You want to stay. They want you to stay. Find out a way forward for both of you.
Should you find that a landlord doesn’t seem to be amenable to listening to you, it might be effective to have an attorney write a letter on your behalf. While the attorney’s letter is likely to include the same items that you have already discussed with your landlord, for some individuals a letter from an attorney carries much more weight. An appeal from a person with supposed expertise (an attorney) may have a greater effect than your words alone.
Also, from a practical standpoint, it demonstrates that you are a professional who is willing to use an attorney at need. No landlord is going to want to not only face the costs of replacing a tenant who wants to work with them, but also potential legal costs of fighting a tenant that wishes to stay.
To sum up:
1) Go into your negotiations with a positive point of view and an “us against the virus” attitude. “Let’s work together to solve both of our points of pain.”
2) Expect to provide documentation to support that you are actually in pain and that this is a temporary set-back, and that you are a strong business that will survive, not someone who was on their way out anyway. Be prepared to provide other reasons why you bring value to the center.
3) Find out what is motivating your landlord and see what their immediate needs are.
4) Expect to be in ongoing negotiations. This is unlikely to be a “one and done”.
5) Remember that you provide a value to the landlord. *Don’t* fall into an “us against them” mentality. This is not a time to negotiate on issues that do not pertain to the pain caused by Covid-19.
Rebecca’s final thought further illustrates the need to expect ongoing negotiations:
“…[I]f the landlords think Trump opening the country in the next two weeks will fix the economy they are probably less likely to feel like they need to give long term concessions and so the tenants will need to be in a mindset that this will really be a long renegotiation with many stages.”
My final thought is this. Should it really come down to a situation where you cannot negotiate with your landlord and you *are* forced out of a location, this is not necessarily the end. You *may* be able to find a landlord who will offer you better terms. No matter how this goes, at least in the short term, there will be a lot of businesses that fail and that will mean open spaces in complexes. While it is expensive to make such a move, there are also opportunities.
But it is far better to stay where you are, and come to a good accommodation, than to move.
And now, the obligatory caveat: Neither Rebecca or I are attorneys or accountants or property brokers. You should consult with them before making any actions. These are my, and Rebecca’s opinions based upon years of experience. They do not constitute legal advice by any stretch of the imagination.
David Wheeler is the CEO of national franchise comic and game store company Dragon’s Lair.
The opinions expressed in this column are solely those of the writer, and do not necessarily reflect the views of the editorial staff of ICv2.com.
