COVID-19 came hard and fast, leaving economic devastation in its wake. With many businesses forced to halt their practices, COVID-19 has effectively cut off the main source of revenue for many companies—and that’s just the beginning.
For some, the situation has taken too great of a toll, relief is futile, and their doors may never open again. For others, there is a fighting chance, but steps need to be taken in order to secure immediate relief for commercial real estate burdens.
As a tenant-rep commercial real estate firm, Keyser is involved in these types of conversations every day. We’re asked questions like, “How can I secure relief from my landlord?” “What if they say no and won’t even hear me out?” “Bills are coming up. What can I do if their pace doesn’t align with my needs?”
All of these questions are real, valid, and have been asked from tenants like you. If you’re experiencing challenges right now, you are not alone.
Now for some companies, it’s easy to say, “we’ve been around for one hundred years and have proven that our business is sound”, for others, it’s not such an easy feat. For younger, newer concepts you have to work twice as hard to prove that you’re a going concern to your landlord.
As a going concern, You have to prove that if they help you today, there will be a tomorrow for you to repay them and continue working together. You have to prove that you’re a viable, long-term partner for that landlord. That’s how you should be looking at the situation between you and your landlord; it’s a partnership. If they work with you, you are able to give your business a fighting chance to survive this. If you are successful, that means a stream of steady income for your landlord. It’s a win-win.
So now that we can agree on the outcome we want to come to fruition, how do you actually put the numbers in place to show that you can be that reliable source of income for your landlord if they do decide to grant you relief?
Put Yourself in Your Landlord’s Shoes
Your landlord knows about your business, they likely vetted you before accepting you as a tenant, but they don’t know your current situation and how you’ve been affected. To give them the information they need to make a decision, put yourself in their shoes. Is the risk of helping you in the short-term worth it for them in the long-term? If yes, how can you go about the process to make it as easy for both parties as possible?
Communicate clearly with them.
First and foremost, you need to communicate clearly. Spell out your existing problems and be open. Balance your challenges by crystalizing why your business will be needed in the future so they can understand the long-term opportunity in front of them. Even though it’s a tenant’s market, it’s time to build partnerships, not an adversary.
Have Your Financials Projections and History Ready
You’ll need to prove that you have been successful in the past and that the decline of revenue is completely dependent on the market conditions. Treat your landlord like an investor and show them the numbers they want to see before they ask. Demonstrate your value to your landlord by showing that you will be able to financially support your contracted space in the long-term.
Know What You’re Asking For
There are options for you to find immediate relief, but you need to know what strategy works best for your business. There is a lot of uncertainty in the market. If this lasts longer than you had anticipated, will your request put you in a worse-off position in three, six, or twelve months?
If it makes sense to extend your lease in exchange for immediate concessions, there are many landlords who would be willing to blend & extend. If you no longer need the space, maybe it’s time to sublease it out to another business for the time being. There are options for you. Your commercial real estate advisor can help illuminate the best strategy for your business.