Lease Renegotiation - Commercial Tenants

[Zachary Toothman]

Hello! I just closed on my first commercial property a few weeks ago. There are a couple commercial units and some residential units in the building, and one commercial space was leased for 10 years earlier this year. That company was acquired by a competitor at the same time I was buying the building and soon after close they want to renegotiate the lease to a lower term, but want to lease the entire building. I see that as a major risk by eliminating the diversification of my tenants while sacrificing the security of a longer lease. They expect me to help them procure parking at an adjacent property to sign-on for a longer term, which I can't control.  I feel like they should pay a penalty or an increased rent to offset that lost value of longer lease and "buy" my risk of a single tenant. Any advice for a fair resolution to the problem?

[Zachary Toothman]

Thanks Everyone for the guidance and items to consider. I was able to negotiate and increased rate on the whole building in exchange for dropping to 5 year term. Works out to about 28% higher rate / sqft and added triple Net. Parking expansion will be handled as a pass through cost liable to the tenant without any guarantees. Ultimately I think this worked out really well. I appreciate everyone's responses! @Joshua Spurlock @Kathy Henley @Ryan Seib @Ronald Rohde