Financial Distress! That’s all we hear about today! The media is telling us that across the country, commercial buildings are either in distress, being foreclosed upon, going bankrupt, or about to be! That may be true of many buildings, but it is certainly not true of all commercial buildings. In fact, it’s not true about most buildings.
Tenants occupying commercial buildings that are in financial distress will likely have some challenging experiences. On the flip side, they may also have opportunities to capitalize on that circumstance, as most executives are well aware.
But, how about companies occupying buildings that are not in distress…those that are well capitalized and properly managed? Do opportunities exist for commercial tenants in buildings that are financially sound? Of course!
Buildings in good financial condition can be very competitive in the current market. In fact, financially stable landlords are often better positioned to provide benefits to their existing tenants than distressed landlords. The addition of new terms, the elimination of unfavorable aspects of prior agreements, restructured financial terms designed to improve lease terms on behalf of commercial tenants, and the capital to do the above, may be more likely available from financially sound landlords, with fewer restrictions than required by landlords experiencing financial challenges. This is especially true when modifications to existing leases require the expenditure of capital or a willingness to eliminate or defer rent payments….often a major problem for distressed landlords.
Is it reasonable for commercial tenants occupying space in financially sound buildings to expect to achieve the same terms and concessions that distressed landlords offer? Absolutely! And, in some cases, even more!
The equation is actually pretty simple. Every good landlord understands the need to retain tenants. If modifying an existing lease agreement means a tenant will remain in-place for a longer time frame, and / or creates additional value for the landlord, you can bet that most landlords would work hard to conclude such a transaction.
Whether or not the building a company occupies is in financial distress opportunities may exist to renegotiate lease terms to the betterment of both tenant and landlord. As the saying goes “You’ve got nothing to lose by asking!”
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Real Estate Strategies Corporation is a respected corporate advisory and transaction services firm that provides thought-leadership, decision-making, planning, project management, and transaction execution services to financial and senior executives at management team-led public, private, and portfolio companies, and not-for-profit organizations. Under the leadership of its award-winning CEO, Andrew B. Zezas, RealStrat’s clients engage the firm when acquiring, disposing, renegotiating, or enhancing occupied leased or owned real estate in New Jersey, Pennsylvania, New York, Connecticut, and throughout North America. By creating and executing Business DRIVEN Real Estate Solutions and identifying hidden Opportunities, RealStrat drives greater operational and financial performance in support of its clients’ stakeholder objectives, M&A requirements, and exit strategies.
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