Commercial Property - tenant rent concession suggestions

[John P.]

Looking for some help.  I own a commercial property in the Smokey Mountains.  Tenant is scheduled to pay $3,500 a month in rent.  Due to the fires in December he tells me business is way down and is looking for a rent concession.  I have no reason to disbelieve him as I believe him to be an honest person.  I gave him $2k of rent concessions at the time of the fire.  He wants to keep the rent at $3k. I want him paying $3,500. However, I want to find a win-win as I like him and I want him to be successful in his business.  I would love it if one day he can buy the building but the only way that happens is for him to be successful in his business.  I have considered asking for his financials to show me how much business is down but it's the kind of business that there could be heavy cash so who knows what those show.  Any suggestions?  Thoughts for a way to structure a deal with some type of variable adjustments?  I am not sophisticated with commercial property so would love any thoughts any of you might have.  Thank you. 

[Damon DiPlacido]

John - Here's a good article about handling this topic:  http://www.coxcastle.com/news-and-publications/200...

Always get something in return. Look to strengthen the lease language, for example, if the lease was negotiated removing any "landlord friendly' clauses this is your opportunity to add it/them back in. 

Finding a balance is important - as you mentioned, you want him to succeed and potentially buy the real estate. At the end of the day, the goal is to retain the tenant. Not just in this example, but it almost always makes sense to retain a tenant, even if it means taking a slight haircut, rather than replacing the tenant, once you factor in lost rent on vacancy, legal fees, brokerage fees, free rent and/or TI for the new tenant.