Richard J. Maturi (August 2012)
More Favorable Terms
For example, tenants leasing retail space are often able to obtain more favorable terms on key leasing provisions, such as opening coverage for one business day, co-tenancy, and use clauses.
"In today's volatile economy, retail tenants do not want to commit to more than an one day opening in case the economy or market area turn down. Likewise, the co-tenancy clauses are very important. Retail tenants do not want to be tied to a property if a major anchor store closes. They want the right to terminate their lease in that event. This is not an absolute but contingent on specific instances. These provisions were unheard of several years ago," explains Grossfeld.
Similarly, in the writing of use clauses, tenants are demanding and obtaining broader definitions of use. In some cases they are obtaining the right to use the property for any lawful use and not a restricted use.
Harold Bordwin, co-president of GA Keen Realty Advisors, tells how they helped Dollar General Corporation strategically manage their store leases. "Even though Dollar General maintains its own large real estate department that reviews leases with 12 months left on the lease on an ongoing basis, corporate management wanted to accelerate the process and include stores with leases with 12 to 36 months left in the lease. With today's economy, Dollar General's negotiating leverage is stronger now than it may be in two to three years out if the economy improves. This represented an excellent opportunity to discuss with the landlords extending the leases for longer periods at more favorable terms to Dollar General, thus making individual stores more profitable," stresses Bordwin.
When times get tough, the tough get smarter. Don't sit on your hands waiting for the downturn to end, review your operations and look for opportunities to make your company leaner and stronger. Negotiate new leases, search out and obtain previously unavailable prime facilities, and beat your competitor to the punch.