Managing Lease                                   Renewals                                    Presented By:                ...
There’s Real Money Here      •    600 Stores of 5,000 Square Feet      •    Five years Leases @ $14.00 PSF      •    20% R...
Getting Ready to Start !                                   • Key decisions                                      –   Who is...
Work Flow -Summary                                   1.  Gather Store/Lease Information                                   ...
Work Flow Step 1                               Gather Information                                   • Gather Store Informa...
Work Flow Step 2                  Renew or Not Renew Decision      • Obtain Decisions            –   Store Size           ...
The Site Visit                                       • Actual Site Visit                                          – Pictur...
Work Flow Step 3             Real Estate Rental Information         • Rental & Vacancy Rates               – Subject Site ...
Work Flow Step 5                                   Evaluate Information                                      • Rank by imp...
EXERCISE OPTION OR                       PASS     • Risks           – Loss of store           – Competitor takes your     ...
Option Exercise Criteria   • Operational concerns        – Market Penetration        – Location of Competitors   •   Marke...
Work Flow                           Draft Written Report    • Try to limit to Two Pages    • Should have at minimum       ...
COMPLETE THE                            NEGOTIATION                                   • Choose Your Negotiator            ...
Opening Position                            Requirements                                     Create Doubt that you       ...
Sample Letter   RE: XYZ Corp Store #xxxx City, ST   Dear Landlord (where possible this should be personalized):   As you a...
Negotiating the Issues                                   • Use multiple issues                                   • Timing ...
DEAL SIGN-OFF                                                   • Prepare Deal Memo                                       ...
PREPARE                        DOCUMENTATION      • Lease Amendments      • Letter Agreement      • Who’s Drafting      • ...
Track Document until Fully                         Executed                                    Remember Jerry’s Rules     ...
Communications      • Update Lease        Abstract            – Paper file            – Lease Administration              ...
How you made your first Million                                   1.  Gathered Store/Lease Information                    ...
SO BUILD YOUR OWN                          PROGRAM                                   • BUILD A TEAM                       ...
Contact Information                           Jerry King                                   • jking@rent-research.com      ...
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Rpcon masterclass s201-lease renewals - jerry king

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Rpcon masterclass s201-lease renewals - jerry king

  1. 1. Managing Lease Renewals Presented By: Jerry King Rent Research Consultants, Inc.Lease Administration Masterclass Friday, 23rd March 2012
  2. 2. There’s Real Money Here • 600 Stores of 5,000 Square Feet • Five years Leases @ $14.00 PSF • 20% Roll over each year • 40% Exercised—60% Re-negotiated • 50% Success Rate • Average 8% Rent Reduction • Over One Million Dollars Per Year SavingsLease Administration Masterclass Friday, 23rd March 2012
  3. 3. Getting Ready to Start ! • Key decisions – Who is In-house contact? – Should I Outsource the project? – What will the program cost? – How do I Interface with store operation? – What are the Accounting concerns? – What are the Reporting requirements and to who? – What are the Field notification Issues? – Who will prepare the Documentation ?Lease Administration Masterclass Friday, 23rd March 2012
  4. 4. Work Flow -Summary 1. Gather Store/Lease Information 2. Refer to Operations for Decision 3. Gather market information 4. Evaluate Information 5. Issue written recommendations 6. Back to Operations for final decision 7. Exercise Option or set up for negotiation 8. Negotiate with landlord 9. Landlord and Operations sign-off on deal 10. Prepare documentation 11. Track documentation to fully executed 12. Update Lease AbstractLease Administration Masterclass Friday, 23rd March 2012
  5. 5. Work Flow Step 1 Gather Information • Gather Store Information on Upcoming Option/Renewals – Option Notice Date and LED – Store Manager Interview – Date and rental history – Landlord information – Premises information – Store sales last three years – Amortization statusLease Administration Masterclass Friday, 23rd March 2012
  6. 6. Work Flow Step 2 Renew or Not Renew Decision • Obtain Decisions – Store Size – Length of Extension? – Maintenance Problems? – CAM Problems? – Signage? – Sales projections? • Minimum Rent vs. Percent Rent? – Other Lease Issues?Lease Administration Masterclass Friday, 23rd March 2012
  7. 7. The Site Visit • Actual Site Visit – Pictures of site including . . . – Drive trade area – Broker signs • Virtual Site Visit – Google Earth and Bing.com – Assessors website netroonline.com Vision Appraisal – Landlord’s website – Community WalkLease Administration Masterclass Friday, 23rd March 2012
  8. 8. Work Flow Step 3 Real Estate Rental Information • Rental & Vacancy Rates – Subject Site – Competing sites • Landlord Information • Photographs and Websites • Competition & sales • Construction – Public – Private • Look for ChangeLease Administration Masterclass Friday, 23rd March 2012
  9. 9. Work Flow Step 5 Evaluate Information • Rank by importance • Rank by source – Single source information – Multiple source information – First Hand vs. second hand – LIS, Map Info, Spectrum – Broker / Agent Comparables • Collaboration • Test validity • Evaluate TimelinessLease Administration Masterclass Friday, 23rd March 2012
  10. 10. EXERCISE OPTION OR PASS • Risks – Loss of store – Competitor takes your old store – Landlord demands higher rent • Rewards – Lower rent – Higher Success Rate – Strong opening negotiating positionLease Administration Masterclass Friday, 23rd March 2012
  11. 11. Option Exercise Criteria • Operational concerns – Market Penetration – Location of Competitors • Market rent Variance • Vacancies in trade area • New Competition in trade area. • Competitors Leaving AreaLease Administration Masterclass Friday, 23rd March 2012
  12. 12. Work Flow Draft Written Report • Try to limit to Two Pages • Should have at minimum – Current Status – Key Findings – Conclusions – Recommendations – Negotiation Goals • Circulate to OperationsLease Administration Masterclass Friday, 23rd March 2012
  13. 13. COMPLETE THE NEGOTIATION • Choose Your Negotiator • Setting reasonable goals • Pre-negotiation concessions • Timing is the key • Opening proposals • When to quitLease Administration Masterclass Friday, 23rd March 2012
  14. 14. Opening Position Requirements  Create Doubt that you are staying  Reveal a reasonable alternative  Be based on facts of which Landlord is aware.  Offer solution to your problem.  Be almost reasonable.Lease Administration Masterclass Friday, 23rd March 2012
  15. 15. Sample Letter RE: XYZ Corp Store #xxxx City, ST Dear Landlord (where possible this should be personalized): As you are aware, the economy is slowly recovering from the worst recessionary period of our generation. However, in many respects, the future holds a great deal of uncertainty as the country and economy continue to navigate this period of transition. If securing a strong creditworthy Tenant during this time of transition is of interest to you and your organization, XYZ Corp is implementing a corporate initiative offering Landlords the opportunity to secure an early extension of its lease in exchange for a reasonable restructuring of the lease terms. We will be contacting you shortly to discuss specific lease modifications. We respectfully request that you respond to them expeditiously regarding this opportunity which should benefit both parties. In the interim, if you have any questions, please do not hesitate to contact us directly at (xxx) xxx-xxxx. Thank you.Lease Administration Masterclass Friday, 23rd March 2012 Sincerely,
  16. 16. Negotiating the Issues • Use multiple issues • Timing of the negotiation • Use NPV evaluation • Incorporating new lease clauses • Pre and Post ConditionsLease Administration Masterclass Friday, 23rd March 2012
  17. 17. DEAL SIGN-OFF • Prepare Deal Memo – Simple LOI • Commits Landlord to new deal • Commits Operations to new deal • Stops wiggle • Stop Nibbling Expanding Knowledge...Best Practices 2010Lease Administration Masterclass Friday, 23rd March 2012
  18. 18. PREPARE DOCUMENTATION • Lease Amendments • Letter Agreement • Who’s Drafting • Obtaining last minute concessions • Typical Add-ons – Self Help – Notice Clauses – Remodel RightsLease Administration Masterclass Friday, 23rd March 2012
  19. 19. Track Document until Fully Executed Remember Jerry’s Rules 1. From the time the deal is made until it is signed there is nothing good that can happen. 2. Once the deal is signed there is nothing bad that can happen. 3. People who understand 1 & 2 are called deal makers. 4. People who don’t understand rules 1 & 2 are called unemployed.Lease Administration Masterclass Friday, 23rd March 2012
  20. 20. Communications • Update Lease Abstract – Paper file – Lease Administration Software. – Memo’s to all – Thank you letter to LandlordLease Administration Masterclass Friday, 23rd March 2012
  21. 21. How you made your first Million 1. Gathered Store/Lease Information 2. Sent it to Operations for Decision 3. Gathered market Data 4. Evaluated the Information 5. Wrote a Report 6. Back to Operations for final decision 7. Decided to re-negotiate the option 8. Negotiated with landlord 9. Got both Landlord and Operations sign-off 10. Prepared documentation 11. Tracked documentation until it was fully executed 12. Update Lease Abstract 13. Got HUGE BONUS for a job well done.Lease Administration Masterclass Friday, 23rd March 2012
  22. 22. SO BUILD YOUR OWN PROGRAM • BUILD A TEAM – In-house Team – Out-source team • SET UP PROCEDURES • NEGOTIATE • DOCUMENT YOUR SAVINGSLease Administration Masterclass Friday, 23rd March 2012
  23. 23. Contact Information Jerry King • jking@rent-research.com • www.rent-research.com • Rent Research Consultants, Inc. PO Box 372 Swansea, MA 02777, USA • Phone 1-866-635-5762 • FAX 1-888-473-1121Lease Administration Masterclass Friday, 23rd March 2012

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