Actual & True Successful Case Study for Tenant Side Real Estate Lease Rate Renegotiation & Resetting of Fair Market Rent with Landlord for Substantial Rent Savings

[Account Closed]

Major & Positive Final Results for the Tenant: Ultimately saved Tenant from going out of business losing their future means of income & livelihood. 

Companies in any industry across the board from an operational cost standpoint, can only allocate a maximum of 10% of their gross sales generated towards rent paid for real estate in order to survive. Some businesses that work on much higher volume such are sit down or fast food drive through restaurants and grocery markets have much lower pain thresholds of 5% to 7% of income generated.

There is considerable power & cost savings that can be secured and gleaned from the most recently signed or completed, Just Leased Rent Comparables that are confidential, private and very difficult to obtain details for (Base rent + Additional Expense Pass Through NNN charges paid by Tenant and also Landlord provided Concessions of Free Rent and Tenant Improvements), which tell the real time story of what is currently occurring in the marketplace for real estate. Data, coupled with numerous Local Submarket Expert Opinion Surveys greatly substantiate and gel from supportive opinions from active leasing professionals that provide maximum credibility & reliability for Commercial & Industrial Real Estate. In this case, a general Retail use and specific Restaurant space.

Extremely Wide Rental Rate Disparity Issue: Tenant was leasing a few thousand square feet for a sit down restaurant unit from the Landlord in a multi-tenant building many years prior, had a soon to expire existing Lease Contract in place with an Option to Renew or extend for a New or Updated lease at Market Levels.

Landlord was attempting to gouge, not being reasonable, demanding +30% higher rent, greatly above market levels in the upper $3/sf/month, NNN lease rate range.

Tenant was already burdened, having major difficulty paying rent and needed rent to be reduced in the low $3 range to not thrive but just to survive.

Ideal Solution: Tenant understood they had only one opportunity, needed a professional on their side who was experienced and familiar with the subject property marketplace and specific use, could get the job done for expert witness testimony & litigation support in court, retained a state licensed real estate appraiser, an MAI or Member of the Appraisal Institute designated consultant.

Interesting that many leases still state & require only the use of an MAI appraisal which is considered the PHD level of appraisers in the United States.

Also, Landlord on their side as their advocate, retained an MAI appraiser - Joke in the real property industry for valuation & appraisal consulting is that the acronym stands for “Made As Instructed” for final rent or overall sale price value which is predetermined or a self-fulfilling prophecy, lopsided either high or low.

The Judge scrutinized both rent study appraisals prepared by the 2 MAI appraisers on each side, a huge disparity at extreme high & low spectrums of concluded rents. After carefully reviewing the most reliable lease comparables & also opinion surveys, found the landlord side advisor had utilized older completed done deal transactions that were not relevant and also the fact that inappropriately obtained opinions from outside of the immediate subject property area was utilized, taken from brokers & property managers that were not true local experts for the proximate submarket. Judge concluded the landlord side was completely & artificially skewed high, out of a reasonable range with a weak lack of support & credibility.

Final Positive Conclusion for Tenant: Judge saw through the smoke and mirrors, reconciled a mere +5% above the tenant side appraiser rent conclusion and pretty much threw the Landlord side lease rate analysis or rent study out the door.

After many prior years of successful operation, the slowdown in the economy had taken a major toll, without this major win as a last resort to lower real estate occupancy costs the tenant would have had to close shop and no longer be in business.
Tenant was ultimately able to save a couple thousand dollars a month or a few ten thousands of dollars a year.

Key is to have the right real estate professional with deep local knowledge, insight of submarket nuances, skilled at analysis and research with established relationships to secure highly sensitive information that is the most up to date in your corner for successful & proper representation and for positive & favorable results.