CASE STUDIES
Strategy – Using Friends & Family as Advisors
The CEO of a very successful company, with years of experience personally negotiating many leases, engaged Greg to help review a complex triple-net lease with a sophisticated landlord.
Greg detailed the significant risks in the existing lease agreement and offered specific recommendations for mitigating these risks in a renewal agreement.
The CEO’s real estate broker happened to be a long-time family friend, but he continued to work with Greg in secret, as he valued his advice and discretion, given the broader circumstances.
Strategy – Should we Sublease? Assignment? Have a Bake Sale?
Greg advises a not-for-profit organization on their planned assumption of a multi-year triple net lease. A member of their board of directors asked Greg to research comparable rental rates in the area and bring the results to an upcoming board meeting.
Greg agreed, but also requested historical financial. After reviewing the organization’s financials, it was clear they would struggle to pay the current rental payment even with a best-case revenue forecast. In fact, they would need to have bake sales and secure additional donations to pay the rent.
Greg suggested subleasing the property instead of taking an assignment of the existing lease. This approach allowed the organization to negotiate a fixed rental rate that was much lower than the original tenant was required to pay (and the original tenant as sublessor was obligated to pay the difference).
This not only reduced organizations monthly rental obligation, but also eliminated any surprise rent bills when the landlord reconciles the triple-net expenses at the end of each year.
Strategy – Lease Renewal
A client sought Greg’s advice when their existing sublease in a shopping center was scheduled to expire. The sublease rental rate was significantly less than the amount the original tenant (sublandlord) had been paying to the landlord, so the landlord wanted the client to pay the “full” rent the sublandlord had been paying (plus an increase) to extend their occupancy in the shopping center.
Unfortunately, the landlord was playing hard ball and insisted that my client must significantly increase their rent or vacate the building at lease expiration. The client began their search for a new space, but the landlord reached out at the last moment to see if the client would reconsider their relocation.
By holding out, the client was able to avoid moving and secured an extension of the lease that allowed either party to terminate the lease with sixty (60) days’ notice. That way landlord could terminate the lease if they found their “dream tenant” willing to pay more rent, and tenant could terminate if their revenue outlook changed, or they found a better space.
In exchange for the short-term deal, the landlord was willing to accept a rental rate at HALF of what the client was paying as a subtenant. Apparently, landlord has still not found their dream tenant since my client is still in the space. This “short-term” arrangement has been working for both parties for over five (5) years!